Uncertainty and the Value of Cash Holdings

Im, Hyun; Park, Heungju; Zhao, Gege

doi:10.2139/ssrn.2881116

Cited by 11 publications

(17 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Im et al . () found that firms facing high levels of uncertainty tend to hold more than twice as much cash as firms facing less uncertainty and especially in the case of financially constrained firms (Han and Qiu, ; Gulen and Ion, ). Thus, firms may reduce their investments when experiencing a period of high EPU.…”

Section: Resultsmentioning

confidence: 99%

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

Zhang

et al. 2019

Accounting & Finance

View full text Add to dashboard Cite

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.

show abstract

Section: Resultsmentioning

confidence: 99%

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

Zhang

et al. 2019

Accounting & Finance

View full text Add to dashboard Cite

show abstract

“…Julio and Yook (2012) and Gulen and Ion (2016) document a sharp reduction in capital expenditures when firms face more uncertainty. Im et al (2017) find that firms hold more cash and decrease investments when the environment is more uncertain. Because political risk spawns uncertainty and thus likely diminishes CSR investments, this hypothesis predicts that a higher degree of political risk leads to weaker CSR engagement.…”

Section: The Uncertainty Hypothesismentioning

confidence: 95%

Does firm‐level political risk influence corporate social responsibility (CSR)? Evidence from earnings conference calls

Chatjuthamard

Treepongkaruna

Jiraporn

et al. 2021

The Financial Review

View full text Add to dashboard Cite

Exploiting a novel measure of firm-level political risk based on earnings conference calls, we explore the effect of political exposure on corporate social responsibility (CSR). We show that firms more exposed to political risk invest significantly more in CSR activities. This finding is consistent with the risk-mitigation hypothesis, which posits that CSR produces moral capital that safeguards the firm in case of a negative event. Hence, firms exposed to more political risk engage in more CSR activities to take advantage of its insurance-like effect. An increase in political exposure by one standard deviation raises CSR engagement by 27.95%.

show abstract

“…Studies indicate that firms adopt more conservative policies during times of high economic policy uncertainty when the cost of borrowing increases (Pástor and Veronesi, 2012; Kelly et al , 2016; Jens, 2017; Colak et al , 2017; Al-Thaqeb and Algharabali, 2019). As surveyed by Al-Thaqeb and Algharabali (2019), during times of high economic policy uncertainty, firms spend less on capital (Gulen and Ion, 2015), launch fewer initial public offerings (IPOs) (Colak et al , 2017), engage in fewer merger and acquisition (M&A) activities (Bonaime et al , 2018), and hold more cash (Demir and Ersan, 2017; Im et al , 2017).…”

Section: Business Confidence Uncertainties and Investmentsmentioning

confidence: 99%

Effects of economic policy uncertainty and political uncertainty on business confidence and investment

Montes

Nogueira

2021

JES

View full text Add to dashboard Cite

PurposeThis study estimates the effects of political uncertainty and economic policy uncertainty on business confidence. Moreover, it also examines business confidence as a transmission channel of political uncertainty and economic policy uncertainty to investment.Design/methodology/approachThe study addresses the Brazilian case from May 2004 to December 2017. Brazil experienced situations of political instability and public distrust in government and its policies, which reflected on the economic environment. The study uses two business confidence indicators that capture entrepreneurs' sentiment in relation to their business and the economy. All models are estimated using ordinary least squares and generalized method of moments.FindingsThe estimates reveal that increases in both political uncertainty and economic policy uncertainty reduce business confidence. The findings also indicate that business confidence acts as a transmission mechanism, i.e. uncertainties affect investments through business confidence.Practical implicationsThe findings point to the following practical implications related to the existence of uncertainties in the Brazilian economy: different institutional difficulties and government indecisions have blurred the political scene and caused political uncertainties. In addition, the same aspects that blurred the political scene also caused uncertainties in relation to economic policy that undermined business confidence, and affected investment.Originality/valueThere is a vast literature on business confidence, as well as studies addressing the relationship between business confidence and investment. This study differs from other studies as follows: in addition to the political uncertainty, it also analyzes the effect of economic policy uncertainty on business confidence; it uses different measures to capture political instability, and it analyzes whether business confidence acts as a transmission channel of both uncertainties to investments.

show abstract

Uncertainty and the Value of Cash Holdings

Cited by 11 publications

References 10 publications

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

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

Does firm‐level political risk influence corporate social responsibility (CSR)? Evidence from earnings conference calls

Effects of economic policy uncertainty and political uncertainty on business confidence and investment

Contact Info

Product

Resources

About