Impact of economic policy uncertainty on financial flexibility before and during the COVID-19 pandemic

Dalwai, Tamanna

doi:10.1108/jabes-08-2022-0205

Cited by 5 publications

(4 citation statements)

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“…Our study uses three measures of cash holdings. The first variable of CashHolding is measured as the natural logarithm of one plus cash and cash equivalents (Dalwai, 2023; Deshmukh et al , 2021; Foley et al , 2007). This measure is considered the most efficient to alleviate the problem of large outliers.…”

Section: Methodsmentioning

confidence: 99%

“…Intellectual capital (IC) is an assimilation of knowledgebased resources such as business ideas, skills and infrastructure (Yang and Lin, 2009) that plays a leading role in the sustainable development of firms (Reed et al, 2006). IC is known to improve a firm's financial and organizational performance (Habib and Dalwai, 2023;Dalwai A crosscountry study and Salehi, 2021;Rehman et al, 2022;Xu et al, 2022), financial health and credit rating (Guim on, 2005;Dalwai and Sewpersadh, 2023) and contribute to the overall economy (Lev and Gu, 2016). High IC efficiency is associated with low financial leverage (D'Amato, 2021).…”

Section: Introductionmentioning

confidence: 99%

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Intellectual capital efficiency, institutional ownership and cash holdings: a cross-country study

Dalwai,

Mohammadi,

Satrovic

2023

RAF

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Purpose This study aims to investigate the roles of intellectual capital efficiency and institutional ownership on cash holdings and their speed of adjustment. Design/methodology/approach Using a sample of 432 firm-year observations of tourism-listed companies, three measures of cash holdings are used as dependent variables and intellectual capital efficiency and institutional ownership as independent variables. The financial data is collected from the S&P Capital IQ database for the period 2015–2020. Two system-generalized methods of moment estimation are used for the robustness checks of the results. Findings The study provides evidence that an increase in intellectual capital efficiency in tourism firms results in lower cash holdings. The research findings also report that characteristics such as firm size, age and market-to-book value ratio are associated with cash holdings. Furthermore, institutional ownership in these firms did not affect the cash holdings. The results also confirm the existence of a target cash holding level to which the tourism firms attempt to converge. These results are robust to the alternative proxy of cash holding and endogeneity tests. Research limitations/implications The study uses intellectual capital efficiency measured by the model proposed by Pulic. Alternative measures of intellectual capital can be included in future studies. Future research can also investigate the impact on cash holdings before and during the pandemic for tourism companies. The study is limited to the impact of institutional ownership; thus, research can be extended to consider other types of ownership. Practical implications The findings of this study indicate that tourism companies should take into account the impact of intellectual capital efficiency on their cash holding decisions. The industry uses a specific financial management strategy in light of better efficiency and possibly values the opportunity cost of holding more cash. Additionally, regulators should re-examine the role of institutional ownership in tourism firms, as it was found to have no impact on cash holdings. The regulators may need to consider other factors, such as firm size and age, when developing policies and regulations to ensure that tourism firms have adequate cash holdings. Originality/value This study adds to the body of knowledge on the factors that influence cash management and ideal cash levels for the tourism industry. The examination of the effect of intellectual capital on cash holdings is a novel contribution, filling a gap in the existing literature. The findings on the speed of adjustment towards optimal cash holdings also provide support for the trade-off theory.

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Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Intellectual capital efficiency, institutional ownership and cash holdings: a cross-country study

Dalwai,

Mohammadi,

Satrovic

2023

RAF

Self Cite

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“…When a company possesses financial flexibility, it is better equipped to address unexpected challenges, such as economic downturns or unforeseen market fluctuations. By using more cash and paying less cash dividends, a company pursuing a financial flexibility strategy can respond well to economic shocks such as financial crises (Arslan-Ayaydin et al, 2014; Bancel & Mittoo, 2011; Fahlenbrach et al, 2020) or periods of economic uncertainty (Dalwai, 2023; Yousefi & Yung, 2022). Yousefi and Yung (2022) also found that financial flexibility enables firms to avoid financial distress.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

How Does Financial Flexibility Strategy Impact on Risk Management Effectiveness?

Nguyen

2024

Sage Open

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In the context of emerging countries trying to attract foreign investors, building governance strategies and risk management of firms is an increasing concern. This study investigates the impact of financial flexibility strategies on the risk management effectiveness of firms and mechanism of these impacts by focusing on Vietnamese listed firms by applying the fixed effect and system GMM methods on a sample of 635 Vietnamese listed firms during the 2010 to 2021 period to derive empirical models under the high risk-high return approach. We also applied robustness tests to ensure that the results are reliable. We also investigate the level of risk management effectiveness among these firms during the 2010 to 2021 period. We found that financial flexibility strategies negatively impact risk management effectiveness of firms through reducing both firm risk and firm performance. Furthermore, we found that the degree of risk management effectiveness differs between low- and high-risk firms in Vietnam, with low-risk firms displaying more effective risk management compared to high-risk firms. Our research shows that financial flexibility strategies are not conducive to risk management effectiveness; however, firms can control the impact of flexibility strategies on risk management by controlling firm performance and risk. JEL Classification: G30, G32, G39

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“…This special issue spans a wide array of topics, from the pandemic’s impact on financial systems (Dalwai, 2023) in both developed and developing economies to the nuanced intersections of religious beliefs and international trade. These concerns, while paramount currently, have enduring relevance.…”

mentioning

confidence: 99%

Guest editorial: Introduction to the special issue: “social action and economic restructuring in the (post-) COVID-19 era”

Huynh,

Luu,

Liang

et al. 2024

IJSE

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The COVID-19 pandemic unleashed unprecedented health and economic crises worldwide, leading to radical shifts in many facets of daily life (Damette and Huynh, 2023) and economic activities (Zhao et al., 2023). Two years after the outbreak, numerous countries transitioned to the "new normal," coinciding with vigorous vaccination campaigns, even as record-breaking COVID-19 cases persisted (Van Nguyen et al., 2022). This required individuals, businesses and communities to recalibrate to this new reality. Viewing the pandemic as a unique case study of a profound "shock" event influencing every economic sphere simultaneously, the papers in this special issue offer empirical insights to assist researchers, policymakers and economic organizations in gauging the ongoing scenario. Crucially, the exploration of how and to what extent the interplay between economic activities, individuals and communities has been reshaped in the post-COVID-19 era forms a central theme.This special issue spans a wide array of topics, from the pandemic's impact on financial systems (Dalwai, 2023) in both developed and developing economies to the nuanced intersections of religious beliefs and international trade. These concerns, while paramount currently, have enduring relevance. The contributions here not only assess contemporary challenges but also spotlight avenues for future research. Leading our collection is "The COVID-19 pandemic and financial stability in Vietnam: evidence from the interbank market" by Le et al. (2024). They investigate the pandemic's effect on Vietnam's financial health, using extensive daily data on the nation's COVID-19 cases and sophisticated analysis techniques. The findings highlight the pandemic's initial adverse effect, which diminishes over time, emphasizing the need for robust interventions to counter unparalleled health crises. Following this is an insightful study on the USA economy's fiscal dynamics amidst the pandemic titled "Debt to the Penny and US Dollar Index: a lead-lag relationship of the US economy under impacts of the Covid-19 outbreak" by Nguyen et al. (2024). Their work reveals the negative shift in the relationship between public debt and currency strength due to the pandemic, offering vital perspectives for policymakers navigating fiscal challenges. Venturing into faith matters, "Contagious crowds and rational faithfuls: a club theory approach" by Animashaun (2024) investigates the surge in religious fervor during crises. This compelling paper delves into the amplification of religious participation as a means to mitigate the economic and health repercussions of the pandemic, emphasizing the vital role religious networks might play in health initiatives and societal stability. Furthering the discourse on technology and finance, we present papers that explore the adoption of digital banking during these challenging times and the elderly demographic's receptiveness to digital payments. These works enhance our understanding of technological impacts on consumer behaviors and strategic adaptations ...

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Impact of economic policy uncertainty on financial flexibility before and during the COVID-19 pandemic

Cited by 5 publications

References 58 publications

Intellectual capital efficiency, institutional ownership and cash holdings: a cross-country study

Intellectual capital efficiency, institutional ownership and cash holdings: a cross-country study

How Does Financial Flexibility Strategy Impact on Risk Management Effectiveness?

Guest editorial: Introduction to the special issue: “social action and economic restructuring in the (post-) COVID-19 era”

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