Political uncertainty and cash holdings: Evidence from China

Xu, Nianhang; Chen, Qinyuan; Xu, Yan; Chan, Kam C.

doi:10.1016/j.jcorpfin.2016.08.007

Cited by 269 publications

(151 citation statements)

References 55 publications

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“…The size is similar in Xu et al (), who document a cash reduction of 39.97 million RMB in the year of local official turnover. The average value of net assets is 4,830 million RMB, and the average cash holding ratio is 0.286.…”

supporting

confidence: 83%

“…Although turnover of city heads in China is usually beyond the control of local firms, and a series of variables are controlled to alleviate omitted variable problems, my empirical results are not completely immune to endogeneity concerns. For example, changes in cash holdings may reflect changes in local 10 The size is similar in Xu et al (2016), who document a cash reduction of 39.97 million RMB in the year of local official turnover. The average value of net assets is 4,830 million RMB, and the average cash holding ratio is 0.286.…”

Section: Dynamic Testsmentioning

confidence: 94%

“…POE has a mean of 0.397, indicating that approximately 40% of firms in our sample are not owned by the state. The dependent variable, Log_Cash, has a mean of −1.875, similar to Xu et al (2016).…”

Section: Control Variablesmentioning

confidence: 99%

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Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

2018

Euro Fin Management

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Using a hand‐collected dataset of city‐level local official turnover in China, I find that average cash holdings of listed firms decrease significantly upon turnover of city heads, and this effect concentrates in privately owned enterprises. Such effects are more pronounced in firms located in cities with lower government quality. I also find that local official turnover leads to decreases in equity issuance for privately owned enterprises but not for state‐owned enterprises, which largely explains our primary findings. Overall, this paper reveals that the cash policy of privately owned enterprises is sensitive to local official turnover in an emerging market.

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supporting

confidence: 83%

Section: Dynamic Testsmentioning

confidence: 94%

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Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

2018

Euro Fin Management

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“…The central government represented by the Central Political Bureau of the Communist Party of China, which includes 25 Communist Party members, assumes absolute power in formulating economic policies. The Chinese central government often uses the ‘visible hand’ to directly control firms’ economic activities, which in turn generates uncertainty in firms’ operational activities (Xu et al ., ; Chen et al ., ; Luo et al ., ,b). Second, Chinese firms lack channels through which to lobby the government to implement favourable economic policies.…”

Section: Introductionmentioning

confidence: 99%

When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment

Zhang

et al. 2019

Accounting & Finance

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We study how economic policy uncertainty (EPU) influences firms' overseas investments for Chinese listed companies. We find a significant negative relationship between EPU and firms' overseas investments after controlling for firm characteristics and macroeconomic variables. Chinese firms seem to reduce their overseas investments on fixed income securities when facing domestic policy uncertainty. The negative relationship is pronounced for financially constrained firms, firms relying on government subsidies and with low overseas revenues, and SOEs. Firms operating in high marketisation regions can mitigate the negative effect of EPU on firms' overseas investments. Our results remain significant when considering endogeneity problems.

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“…Third, our paper is related to recent studies on the effects of political uncertainty on Asia‐Pacific listed companies. Recent evidence shows that political turnover in China leads firms to significantly reduce corporate investment (An et al ., ) and cash holding (Xu et al ., ). Luo et al .…”

Section: Introductionmentioning

confidence: 97%

Economic policy uncertainty and corporate inventory holdings: evidence from China

Zeng

Zhong

2019

Accounting & Finance

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We investigate the impact of economic policy uncertainty (EPU) on corporate inventory holdings in China over the period 2007-2017. We find that EPU leads firms to significantly reduce inventory holdings and this effect is particularly pronounced among non-state-owned enterprises. The adjustment of inventory holdings enhances firms' operating and market performance consequently. In addition, firms with greater financial constraints or stronger external governance are more affected by EPU. Further exploration shows that EPU induces high precautionary cash holdings, which crowds out inventories. Our results illustrate that firms reallocate between inventories and cash to cope with uncertainty associated with economic policy changes.

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Political uncertainty and cash holdings: Evidence from China

Cited by 269 publications

References 55 publications

Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

Local official turnover, ownership, and firm cash holdings: Insights from an emerging market

When to go abroad: economic policy uncertainty and Chinese firms’ overseas investment

Economic policy uncertainty and corporate inventory holdings: evidence from China

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