Monetary policy uncertainty and corporate cash holdings: Evidence from China
Haozhe Han and
Xingjian Wang
Journal of Financial Stability, 2023, vol. 67, issue C
Abstract:
This paper empirically explores the effect of monetary policy uncertainty on corporate cash holdings in China. We find robust evidence that monetary policy uncertainty is positively related to corporate cash holdings. The firms’ precautionary behavior in cash holdings is chiefly attributed to the increase in financial frictions rather than the reduction in corporate investments. The promoting effect of monetary policy uncertainty on cash holdings is more pronounced among firms with more severe financial constraints, firms with higher dependence on external finance, firms with worse access to bank financing, and non-SOEs, and during the period of monetary policy tightening. Our study suggests that firms hold more cash to cushion potential liquidity shortfalls induced by the increase in monetary policy uncertainty.
Keywords: Monetary policy uncertainty; Cash holdings; Financial friction; Real option (search for similar items in EconPapers)
JEL-codes: E52 G31 G32 G34 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572308923000384
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:finsta:v:67:y:2023:i:c:s1572308923000384
DOI: 10.1016/j.jfs.2023.101138
Access Statistics for this article
Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman
More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).