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The impact of macroeconomic fluctuations on cash holdings of listed companies in China

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  • Ye, Chuanzhi

Abstract

Changes in the global economic situation since 2020 have exacerbated the volatility of China's macroeconomic growth from 2020 to 2023, providing conditions for empirical research on corporate finance using natural experiments. This paper selects the period from 2018 to 2023 as the research period. Based on the sensitivity of industries to macroeconomic fluctuations, 2327 sample companies listed on the Shanghai and Shenzhen stock exchanges during this period are divided into defensive industries and cyclical industries. This paper empirically studies the impact of macroeconomic fluctuations on the cash holdings of listed companies in defensive and cyclical industries. The research results show that the cash holdings of defensive industries remain stable during the entire macroeconomic fluctuation period, while cyclical industries significantly increase their cash holdings compared to economically stable periods. The trade-off theory and the precautionary motive for cash can well explain the cash holdings of listed companies in defensive and cyclical industries during economic fluctuations.

Suggested Citation

  • Ye, Chuanzhi, 2025. "The impact of macroeconomic fluctuations on cash holdings of listed companies in China," Journal of Asian Economics, Elsevier, vol. 100(C).
    • Handle: RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001514
    DOI: 10.1016/j.asieco.2025.102027
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    Keywords

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    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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