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Analyzing the effects of terrorist attacks on the value of cash holdings

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  • Kim, Hyeong Joon
  • Han, Seung Hun
  • Mun, Seongjae

Abstract

This study focuses on terrorist attacks as exogenous shocks on business uncertainty, specifically whether terrorist attacks affect the value of a firm's cash holdings. We find that firms with excess cash have higher cash holding values when a terrorist attack occurs near their locations; these results also hold for the excess stock returns of firms that increased their cash holdings. Furthermore, the results strengthen when firms face more financial constraints, fewer agency conflicts, and better investment opportunities. Overall, this study suggests that cash is a more valuable asset under the circumstance with high uncertainty such as terrorist attacks.

Suggested Citation

  • Kim, Hyeong Joon & Han, Seung Hun & Mun, Seongjae, 2022. "Analyzing the effects of terrorist attacks on the value of cash holdings," Finance Research Letters, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002452
    DOI: 10.1016/j.frl.2021.102171
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    Cited by:

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    3. Benkraiem, Ramzi & Gaaya, Safa & Lakhal, Faten & Lakhal, Nadia, 2023. "Economic policy uncertainty, investor protection, and the value of excess cash: A cross-country comparison," Finance Research Letters, Elsevier, vol. 52(C).
    4. Lee, Sang Ho & Choi, Daewoung Joey & Han, Seung Hun, 2023. "Corporate cash holdings in response to climate risk and policies," Finance Research Letters, Elsevier, vol. 55(PA).

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    More about this item

    Keywords

    Terrorist attacks; Excess cash; Value of cash holdings; Business uncertainty;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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