Oil price uncertainty and corporate cash holdings: Global evidence

Abdulaziz Ahmed Alomran and Bader Jawid Alsubaiei

International Review of Financial Analysis, 2022, vol. 81, issue C

Abstract: This study investigates the effects of oil price uncertainty on corporate cash holdings using large international publicly listed firms from 89 countries for the period 1990–2017. Building on the precautionary motive of cash and the trade-off theory, we argue that the oil price uncertainty has a significant impact on corporate cash holdings and this impact is nonlinear. First, we find that oil price volatility is positively associated with corporate cash holdings. However, we then find evidence that shows that the association between oil volatility and cash holdings exhibits a U-shape. Finally, we present evidence that the positive relationship between oil price uncertainty and corporate cash holdings is more pronounced in firms operating in oil-exporting countries and in oil-exposed industries. Overall, our findings support our predictions and are robust to multiple robustness tests.

Keywords: Cash holdings; Oil market uncertainty; Oil-exporting countries; Oil-exposed industries (search for similar items in EconPapers)
JEL-codes: E30 F30 G30 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:81:y:2022:i:c:s1057521922000837

DOI: 10.1016/j.irfa.2022.102115

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