International trade friction and firm cash holdings

Liang Pan and Lili Lei

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: In 2017, the United States launched a "301″ investigation, imposed a series of additional tariffs on China, which led to the US-China trade war. In this paper, we investigate the impact of the trade war on firms' cash holdings in the context of China. Our results indicate that the trade frictions have significantly increased cash holdings of manufacturing firms. This effect arises mainly through the channel if increased trade policy uncertainty. Our findings offer direct evidence and guidance for both firm strategy and policymakers in the important trade friction.

Keywords: China-US trade friction; Cash holdings; Trade policy uncertainty; Diff-in-diff (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003483

DOI: 10.1016/j.frl.2023.103976

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