The influence of cash flows on the financial distress situation of non-financial listed companies in Vietnam

Abstract

The study assesses the influence of cash flows on the financial distress of listed companies in the Vietnamese stock market during the period 2010-2022. The Zmijewski’s X-score financial distress forecasting model was employed by the author to analyze the impact of cash flows on the financial distress of 349 non-financial listed companies on the Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange. The data, collected by the author, were extracted from the FiinPro-X data extraction platform. Using various regression models like OLS, FEM, REM, and GLS, the author investigated the influence of cash flows on the financial distress of listed companies in Vietnam. Descriptive statistical results indicate that the average Z-score of the companies is less than 0, signifying that the companies in the study are in a safe zone with good financial health. Regression results demonstrate a negative correlation between cash flows from operating activities and financial distress, suggesting that an increase in cash flows from operating activities corresponds to a decrease in financial distress. Conversely, cash flows from financing activities show a positive correlation with financial distress, indicating that an increase in cash flows from financing activities leads to an increase in financial distress. However, cash flows from investing activities do not show statistical significance, implying that they do not provide evidence of financial weakness or bankruptcy risk for the company. Control variables in the model, such as company size and years since establishment, also have statistical significance in explaining the impact on financial distress