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Pandemics and cash

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  • Mufaddal Baxamusa
  • Abu Jalal

Abstract

We investigate the relationship between firms’ cash holdings and pandemics. Our results show that compared to tele‐workable firms, whose employees can work remotely, non‐tele‐workable firms with more on‐site employees increase cash during pandemics. This increase in cash comes from short‐debt, preferred stocks, reduction in capital expenditures, discontinuation of some operations and lower tax payments. Firms hold more cash as a reaction to higher default risk. For non‐tele‐workable firms, there is a positive relationship between abnormal stock returns and cash, suggesting that this increase in cash during pandemics is not driven by behavioral reasons but by increases in uncertainty in labor productivity.

Suggested Citation

  • Mufaddal Baxamusa & Abu Jalal, 2023. "Pandemics and cash," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(7-8), pages 1467-1501, July.
    • Handle: RePEc:bla:jbfnac:v:50:y:2023:i:7-8:p:1467-1501
    DOI: 10.1111/jbfa.12657
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