Abstract
This paper analyses the joint effects of Economic Policy Uncertainty (EPU) and inflation risk on the Corporate Cash Holdings (CCH) of US firms from 2011 to 2021. The baseline results suggest that EPU and inflation risk positively impact CCH. Moreover, we find the same results between inflation risk and CCH. However, EPU and CCH are negatively associated. Additionally, construction (finance) firms hold higher (lower) cash at the time of EPU and inflationary risk. We also find that firms hold higher (lower) cash during Democrat (Republican) presidential terms. The two-step system Generalized Method of Moments approach used to control the potential endogeneity issues indicates the same results and supports the baseline findings.
Original language | English |
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Pages (from-to) | 865-887 |
Number of pages | 23 |
Journal | Review of Quantitative Finance and Accounting |
Volume | 62 |
Issue number | 3 |
Early online date | 7 Nov 2023 |
DOIs | |
Publication status | Published - 1 Apr 2024 |
Keywords
- Corporate Cash Holdings
- Democrat
- Economic Policy Uncertainty
- Inflation
- Republican