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The European Financial Crisis and Firms' Cash Holding Policy: An Analysis of the Precautionary Motive

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  • Maria Belén Lozano
  • Serhat Yaman

Abstract

This paper analyzes the relation between the 2008 European financial crisis and firms' cash holding policies from a precautionary motive perspective. After considering how the European financial crisis affected the cash holding policy across different period times, we focus on whether these variations come from changes in precautionary motives. We find a positive effect for the short crisis period and a negative effect for long crisis period for the full sample. We also find evidence that for financially constrained firms, the relation between cash volatility and cash holding is positive for short crisis period but turns negative for the long crisis period.

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  • Maria Belén Lozano & Serhat Yaman, 2020. "The European Financial Crisis and Firms' Cash Holding Policy: An Analysis of the Precautionary Motive," Global Policy, London School of Economics and Political Science, vol. 11(S1), pages 84-94, January.
    • Handle: RePEc:bla:glopol:v:11:y:2020:i:s1:p:84-94
    DOI: 10.1111/1758-5899.12768
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    Cited by:

    1. Gonenc, Halit & Polten, Marc-Oliver & Westerman, Wim, 2022. "U.S., Anglo-Saxon European, and non-Anglo-Saxon European cash holdings around the financial crisis," Global Finance Journal, Elsevier, vol. 52(C).
    2. Honda, Tomohito & Uesugi, Iichiro, 2021. "COVID-19 and Precautionary Corporate Cash Holdings: Evidence from Japan," RCESR Discussion Paper Series DP21-2, Research Center for Economic and Social Risks, Institute of Economic Research, Hitotsubashi University.
    3. Linda Puspita SARI & Anggita Langgeng WIJAYA, 2022. "Financial Liquidity of Indonesian Manufacturing Companies before and during the COVID-19 Pandemic," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 3(1), pages 61-72, January.
    4. Jaeseong Lim, 2023. "Organization Capital and Corporate Governance," JRFM, MDPI, vol. 16(9), pages 1-14, August.
    5. Fatima Saleh Abd Almajeed Al-Hamshary & Akmalia M. Ariff & Khairul Anuar Kamarudin & Norakma Abd Majid, 2023. "Corporate Risk-Taking and Cash Holdings: The Moderating Effect of Investor Protection," Capital Markets Review, Malaysian Finance Association, vol. 31(1), pages 1-23.
    6. Jebran, Khalil & Chen, Shihua, 2022. "Corporate policies and outcomes during the COVID-19 crisis: Does managerial ability matter?," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    7. Anggita Langgeng WIJAYA, 2021. "Determinants of Corporate Cash Holdings," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 12(1), pages 100-115, June.
    8. Şirin Özlem & Omer Faruk Tan, 2022. "Predicting cash holdings using supervised machine learning algorithms," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-19, December.

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