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Does economic policy uncertainty raise corporate precautionary cash holdings? Evidence from China
Author(s) -
Su Xin,
Zhou Shengshi,
Xue Rui,
Tian Jinfang
Publication year - 2020
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12674
Subject(s) - china , business , cash , monetary economics , empirical research , empirical evidence , economics , finance , geography , philosophy , epistemology , archaeology
Using China as the research setting, this paper investigates the relationship between economic policy uncertainty and corporate precautionary cash holdings. Empirical results show a U‐shaped relation between economic policy uncertainty and corporate precautionary cash holdings. Empirical analysis, in terms of ownership structure, firm size, corporate competitiveness and geographical location, further shows that (i) the effects for economic policy uncertainty in both state‐owned and non‐state‐owned enterprises are significant, but the effect is stronger for state‐owned enterprises; (ii) such significant effect is also found more strongly in small and medium‐sized enterprises and highly competitive enterprises; and (iii) the effects for eastern, central and western China are all statistically significant, but the effect is strongest for eastern China.