Economic policy uncertainty and corporate cash policy: International evidence |
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Institution: | 1. College of Economics & Academy of Financial Research, Zhejiang University, Hangzhou, China;2. School of Business Administration, University of Dayton, Dayton, OH, United States;1. School of Business, Renmin University of China, Beijing 100872, China;2. Department of Finance, Gordon Ford College of Business, Western Kentucky University, Bowling Green, KY 42101, USA |
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Abstract: | I investigate the influences of economic policy uncertainty on corporate cash policy. The findings show that there is a positive association between economic policy uncertainty and cash holdings, as well as the propensity to save cash out of operating cash flow. Further analyses suggests that economic policy uncertainty affects corporate cash policy by influencing firms’ precautionary saving motives and the effect is larger when firms have difficulty in raising external finance. Using the new index developed by Baker et al. (2016), I extend the literature on economic policy uncertainty and show that it is an important macro-level factor in influencing corporate cash policy. |
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Keywords: | Economic policy uncertainty Cash policy Precautionary saving motives Financial constraints |
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