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Policy uncertainty and firm cash holdings

Author

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  • Phan, Hieu V.
  • Nguyen, Nam H.
  • Nguyen, Hien T.
  • Hegde, Shantaram

Abstract

This research examines the relation between government economic policy uncertainty and firm cash holdings. We find evidence that policy uncertainty is positively related to firm cash holdings due to firms' precautionary motives and, to a lesser extent, investment delays. The relation between policy uncertainty and cash holdings is more pronounced for firms dependent on government spending and extends beyond business cyclicality. Further analysis indicates that the effects of policy uncertainty on corporate cash holdings are distinct from those of political, market, or other macroeconomic uncertainty.

Suggested Citation

  • Phan, Hieu V. & Nguyen, Nam H. & Nguyen, Hien T. & Hegde, Shantaram, 2019. "Policy uncertainty and firm cash holdings," Journal of Business Research, Elsevier, vol. 95(C), pages 71-82.
    • Handle: RePEc:eee:jbrese:v:95:y:2019:i:c:p:71-82
    DOI: 10.1016/j.jbusres.2018.10.001
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    More about this item

    Keywords

    Policy uncertainty; Cash holdings; Precautionary motives; Financial constraints;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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