Abstract
This study investigates the impact of economic policy uncertainty (EPU) and world governance indicators (WGI) on corporate cash holdings using a global panel dataset spanning 1997–2023. Employing various regression techniques, including the Fama-MacBeth approach, we find that EPU has a significant positive effect on cash holdings, consistent with the precautionary motive theory. The analysis of WGI reveals that most governance factors, particularly government effectiveness, regulatory quality, and rule of law, are positively associated with cash holdings. However, the effects vary across firm characteristics and economic conditions. Specifically, the impact of EPU and WGI on cash holdings differs between high and low leverage firms, as well as during systemic shock periods versus non-shock periods. Our findings contribute to the literature by highlighting the complex interplay between macroeconomic uncertainty institutional quality, and corporate financial decisions.
Presenters
Muhammad Arslaan KhalidSessional Lecturer, Salford Business School, University of Salford, United Kingdom
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
KEYWORDS
Economic policy uncertainty World governance indicators corporate cash holdings
