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Pandemic effect on corporate financial asset holdings: Precautionary or return-chasing?

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  • Gao, Haoyu
  • Wen, Huiyu
  • Wang, Xingjian

Abstract

This study empirically investigates whether and how the COVID-19 pandemic affects corporate financial asset holdings. We find that firms with higher pandemic exposure are less likely to hold financial assets. Mechanism analyses suggest that the return-chasing rationale dominates the precautionary motive concerning the pandemic effect on corporate financial asset holdings. Furthermore, firms prefer to liquidate highly liquid financial assets to fill the pandemic-induced liquidity shortage. This study contributes to the economic consequences of the COVID-19 pandemic regarding corporate portfolio choice, and sheds light on corporate resilience to crises.

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  • Gao, Haoyu & Wen, Huiyu & Wang, Xingjian, 2022. "Pandemic effect on corporate financial asset holdings: Precautionary or return-chasing?," Research in International Business and Finance, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:riibaf:v:62:y:2022:i:c:s0275531922001374
    DOI: 10.1016/j.ribaf.2022.101750
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    Cited by:

    1. Wu, Kai & Lu, Yufei, 2023. "Corporate digital transformation and financialization: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 57(C).
    2. Han, Haozhe & Wang, Xingjian, 2023. "Monetary policy uncertainty and corporate cash holdings: Evidence from China," Journal of Financial Stability, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Financial asset holdings; COVID-19 pandemic; Precautionary; Return-chasing; Portfolio choice;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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