Economic policy uncertainty, investor protection, and the value of excess cash: A cross-country comparison

Ramzi Benkraiem, Safa Gaaya, Faten Lakhal and Nadia Lakhal

Finance Research Letters, 2023, vol. 52, issue C

Abstract: This paper provides new evidence on the effect of economic policy uncertainty (EPU) on the value of excess cash. We find that EPU decreases the value of excess cash holdings. Thus, investors discount the value of excess cash held by firms that are highly exposed to uncertainty due to related agency and information asymmetry issues. We also investigate whether the value of excess cash holding in uncertain periods depends on the degree of investor protection. The findings reveal that investors penalize firms that hold excess cash during economic and politic shortfalls only in countries with strong investor protection environments.

Keywords: Value of excess cash; Economy policy uncertainty; Investor protection; Agency motive; Information asymmetry (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007486

DOI: 10.1016/j.frl.2022.103572

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