TITLE:
Economic Cycle, Uncertainty of Economic Policy and Cash Holding of Listed Companies
AUTHORS:
Qianqian Wang
KEYWORDS:
Economic Cycle, Economic Policy Uncertainty, Cash Holding, Cash Holding Value
JOURNAL NAME:
Modern Economy,
Vol.10 No.1,
January
22,
2019
ABSTRACT:
Based on the systematic review and economic analysis
of the theoretical literature, we consider not only the impact of the economic
cycle or the economic policy uncertainty (EPU) on the cash holding ratio, but
also the comprehensive impact of the two on the cash holding rate. We raise the
research hypothesis by using the data from 2004-2015 in the A-share listed
companies which are listed in Shanghai and Shenzhen securities exchange as
research samples. The empirical results show that: 1) There are respectively
negative correlation between the economic cycle and the cash holding of listed
companies, and positive correlation between the EPU and the cash holding. 2) During the boom, the
cash holdings are significantly positive with the current EPU and the last
stage; during the recession, the cash holdings of listed companies is
significantly negatively correlated with the current EPU, while positive with
the last stage. 3) We further examine the role of the economic cycle and the
EPU on the cash holding value, and find that EPU will reduce the cash holding
value. 4) When the economy is booming, the increase in EPU will reduce the
market value of corporate cash holdings, but it is not significant. During recession, the increase in EPU will increase the market value of cash holdings.