Does economic policy uncertainty raise corporate precautionary cash holdings? Evidence from China. (9th July 2020)

• Record Type: Journal Article
• Authors: Su, Xin; Zhou, Shengshi; Xue, Rui; Tian, Jinfang
• Is Part Of: Accounting and finance. Volume 60:Number 5(2020)
• Page Start: 4567
• Page End: 4592
• Publication Date: 2020-07-09
• Subjects: Economic policy uncertainty -- Precautionary cash holdings -- Ownership structure -- Firm size -- Corporate competitiveness -- Regional analysis; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12674
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: Using China as the research setting, this paper investigates the relationship between economic policy uncertainty and corporate precautionary cash holdings. Empirical results show a U‐shaped relation between economic policy uncertainty and corporate precautionary cash holdings. Empirical analysis, in terms of ownership structure, firm size, corporate competitiveness and geographical location, further shows that (i) the effects for economic policy uncertainty in both state‐owned and non‐state‐owned enterprises are significant, but the effect is stronger for state‐owned enterprises; (ii) such significant effect is also found more strongly in small and medium‐sized enterprises and highly competitive enterprises; and (iii) the effects for eastern, central and western China are all statistically significant, but the effect is strongest for eastern China.