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The Cash Holdings and Corporate Investment Surrounding Financial Crisis: The Cases of China and Taiwan

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  • Huey-Ling Shiau
  • Yung-Ho Chang
  • Yi-Jing Yang

Abstract

The widely recognized 2007–2008 financial crisis has introduced observable shifts in cash holdings and corporate investment. We evaluate the effect of the financial crisis on cash holdings, corporate investment, and investment-cash flow sensitivity for China and Taiwan firms over the 2001–2014 period. We observe that in China and Taiwan firms increase equity financing and reduce capital expenditures to raise cash holdings after the crisis. The cash holdings for China firmsrises with operating earnings but declines with dividend payouts, and their working capital is upward overtime. On the contrary, the capital expenditures and working capital of the Taiwan firms becomes more conservative after the crisis. The empirical evidence suggests that corporate investment can be described by liquidity correlated to the state of the capital markets.

Suggested Citation

  • Huey-Ling Shiau & Yung-Ho Chang & Yi-Jing Yang, 2018. "The Cash Holdings and Corporate Investment Surrounding Financial Crisis: The Cases of China and Taiwan," Chinese Economy, Taylor & Francis Journals, vol. 51(2), pages 175-207, March.
    • Handle: RePEc:mes:chinec:v:51:y:2018:i:2:p:175-207
    DOI: 10.1080/10971475.2018.1447833
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    Citations

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    Cited by:

    1. Khalil Jebran & Shihua Chen & Muhammad Zubair Tauni & Hassan Ahmad, 2019. "Corporate Governance, Ultimate Owner, and Target Cash Holdings: Evidence From China," SAGE Open, , vol. 9(4), pages 21582440198, December.
    2. Junkai Wang & Guanhua Liang, 2022. "Regional Investment Preferences and Corporate Cash Holdings: Evidence from China," Sustainability, MDPI, vol. 14(23), pages 1-16, November.
    3. Tran, Quoc Trung, 2020. "Financial crisis, shareholder protection and cash holdings," Research in International Business and Finance, Elsevier, vol. 52(C).
    4. Ejaz Aslam & Khuram Mobusher Azam & Anam Iqbal, 2021. "The Risk Analysis of Ṣukūk: An Empirical Evidence from Pakistan تحليل مخاطر الصكوك: أدلة تجريبية من باكستان," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 34(1), pages 25-43, January.
    5. Issal Haj-Salem & Khaled Hussainey, 2021. "Risk Disclosure and Corporate Cash Holdings," JRFM, MDPI, vol. 14(7), pages 1-15, July.
    6. Jianjun Sun & Nannan Zu & Zhifeng Liu, 2022. "The Trends and Gaps in the Sensitivity of Investment to Cash Flow: Evidence from China," Sustainability, MDPI, vol. 14(12), pages 1-26, June.
    7. Tran, Quoc Trung, 2021. "Economic policy uncertainty and cost of debt financing: International evidence," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).

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