Corporate precautionary savings: Evidence from the recent financial crisis

Zhenzhen Sun and Yaping Wang

The Quarterly Review of Economics and Finance, 2015, vol. 56, issue C, 175-186

Abstract: This paper examines the effects of the recent financial crisis on corporate cash holdings and saving propensities. We find that on average, firms reduce their cash holdings in the first year of the crisis when the supply of external finance is tightened, and increase their holdings in cash from the third quarter of 2008 when the demand-side effects of the crisis are stronger. More importantly, we find that the positive cash flow sensitivities of cash are significantly stronger during the financial crisis. This effect is more pronounced in financially constrained firms and firms with a high precautionary motive. Our results suggest that firms tended to save more as a precautionary motive during the recent financial crisis.

Keywords: Cash savings; Financial constraints; Precautionary motive; Financial crisis (search for similar items in EconPapers)
JEL-codes: G01 G32 G35 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:56:y:2015:i:c:p:175-186

DOI: 10.1016/j.qref.2014.09.006

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