Institutional development, political uncertainty, and corporate cash holdings: Evidence from China

Xiang Zhang, Feng Zhan and Bin Liu

Finance Research Letters, 2023, vol. 53, issue C

Abstract: This study examines the relationship between institutional development, political uncertainty, and corporate cash holding decisions. We show that the impact of institutional development on firms' cash holding decisions is non-linear. Our empirical results also indicate that firms tend to hold more cash at the early stage of economic development. With the legal and economic environment improvement, firms' cash holding decreases. Furthermore, our study finds that political uncertainty has a moderating effect on the relationship between institutional development and the firm's cash holdings. This effect is stronger for non-state-owned enterprises than that for state-owned enterprises.

Keywords: Cash holdings; Political uncertainty; Institutional development (search for similar items in EconPapers)
JEL-codes: G32 G38 O43 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007991

DOI: 10.1016/j.frl.2022.103623

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