Analyzing the effects of terrorist attacks on the value of cash holdings

Hyeong Joon Kim, Seung Hun Han and Seongjae Mun

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

Abstract: This study focuses on terrorist attacks as exogenous shocks on business uncertainty, specifically whether terrorist attacks affect the value of a firm's cash holdings. We find that firms with excess cash have higher cash holding values when a terrorist attack occurs near their locations; these results also hold for the excess stock returns of firms that increased their cash holdings. Furthermore, the results strengthen when firms face more financial constraints, fewer agency conflicts, and better investment opportunities. Overall, this study suggests that cash is a more valuable asset under the circumstance with high uncertainty such as terrorist attacks.

Keywords: Terrorist attacks; Excess cash; Value of cash holdings; Business uncertainty (search for similar items in EconPapers)
JEL-codes: G30 G32 G39 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:45:y:2022:i:c:s1544612321002452

DOI: 10.1016/j.frl.2021.102171

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