Is cash the panacea of the COVID-19 pandemic: Evidence from corporate performance

Michael Zheng

Finance Research Letters, 2022, vol. 45, issue C

Abstract: This study investigates the impact of COVID-19 crisis on corporate investment and financing policies. Using a difference-in-difference approach, I find while firms suffer from a real negative shock from the pandemic on average, firms with an abundant cash reserve prior to the crisis outperform firms without. Consistent with the precautionary motive behind corporate cash holdings, this paper demonstrates the effect of cash holdings is meaningful to mitigate adverse effect of the aggregate market. My finding also highlights the difficulty in estimating the optimal cash level when rare market condition is considered.

Keywords: COVID-19; Pandemic; Cash; Investment; Financing; Payout; Profitability; Corporate liquidity; Financing constraints; Risk management (search for similar items in EconPapers)
JEL-codes: G01 G31 G32 G35 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612321002324
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002324

DOI: 10.1016/j.frl.2021.102151

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().