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Can Cash Be a Ventilator for Firms Suffering from COVID-19? Evidence from Stock Market in Japan

Author

Listed:
  • Kohei Aono

    (College of Economics, Ritsumeikan University)

  • Keiichi Hori

    (School of Economics, Kwansei Gakuin University)

Abstract

This paper explores how cash can mitigate adverse COVID-19 shocks to firms using an event-study methodology and the financial data from firms listed on the Tokyo Stock Exchange. We find that firms with more cash, less debt, and larger scale suffered less from the pandemic during the entire event window. We also find that the pandemic reduced the value of future investment opportunities the firms might invest in. Finally, we show that the variations in stock returns reflecting firm-specific factors become relatively smaller than that induced by market returns as cash holdings increase.

Suggested Citation

  • Kohei Aono & Keiichi Hori, 2020. "Can Cash Be a Ventilator for Firms Suffering from COVID-19? Evidence from Stock Market in Japan," Discussion Paper Series 214, School of Economics, Kwansei Gakuin University.
    • Handle: RePEc:kgu:wpaper:214
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    COVID-19; cash holdings; stock returns; event study; precautionary demand.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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