IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v55y2023i32p3728-3746.html
   My bibliography  Save this article

The impact of economic policy uncertainty and financial development on the sensitivity of corporate cash holding to cash flows

Author

Listed:
  • Tenkir Seifu Legesse
  • Haifeng Guo
  • Ying Wang
  • Jiqiang Tang
  • Zhen Wu

Abstract

The paper examines how economic policy uncertainty and financial development affect a firm’s cash-holding policy before and after the global financial crisis. Using Chinese nonfinancial firm data from 1997 to 2018, we obtain three main findings. First, economic policy uncertainty increases corporate cash holdings and its sensitivity to operating cash flows. Second, financial institution and market developments reduce corporate cash-holdings’ cash flow sensitivity. Third, the impact of economic policy uncertainty on corporate cash-holdings’ sensitivity to operating cash flows decreases with financial development. Firms adjust their cash-holding policy in response to changes in economic policy uncertainty and financial development, indicating that macroeconomic factors determine the precautionary motive for holding cash.

Suggested Citation

  • Tenkir Seifu Legesse & Haifeng Guo & Ying Wang & Jiqiang Tang & Zhen Wu, 2023. "The impact of economic policy uncertainty and financial development on the sensitivity of corporate cash holding to cash flows," Applied Economics, Taylor & Francis Journals, vol. 55(32), pages 3728-3746, July.
    • Handle: RePEc:taf:applec:v:55:y:2023:i:32:p:3728-3746
    DOI: 10.1080/00036846.2022.2117781
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00036846.2022.2117781
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036846.2022.2117781?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:55:y:2023:i:32:p:3728-3746. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.