TY - JOUR
T1 - Does firm-level political risk affect cash holdings?
AU - Bin Hasan, Shehub
AU - Alam, Md Samsul
AU - Paramati, Sudharshan Reddy
AU - Islam, Md Shahidul
N1 - © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022.
PY - 2022/7
Y1 - 2022/7
N2 - We investigate whether firm-level political risk affects corporate cash holdings. Taking a sample of 5424 US firms with 129,750 firm-quarter observations from 2002Q1 to 2021Q3, we find that cash holdings is higher for firms with greater exposure to firm-level political risk. The positive relationship between firm political risk and cash holdings is consistent for financial constraint and non-constraint firms, high and low growth firms, pro-cyclical and counter-cyclical and competitive industries. Further, our findings are consistent to alternative measures of firm-level political risk and cash holdings. In addition, our findings remain robust with different endogeneity tests: a natural experiment, an instrumental variable approach, and a propensity score matching. Overall, we present novel evidence on the determinants of corporate cash holdings.
AB - We investigate whether firm-level political risk affects corporate cash holdings. Taking a sample of 5424 US firms with 129,750 firm-quarter observations from 2002Q1 to 2021Q3, we find that cash holdings is higher for firms with greater exposure to firm-level political risk. The positive relationship between firm political risk and cash holdings is consistent for financial constraint and non-constraint firms, high and low growth firms, pro-cyclical and counter-cyclical and competitive industries. Further, our findings are consistent to alternative measures of firm-level political risk and cash holdings. In addition, our findings remain robust with different endogeneity tests: a natural experiment, an instrumental variable approach, and a propensity score matching. Overall, we present novel evidence on the determinants of corporate cash holdings.
KW - Business cycle
KW - Cash holdings
KW - Financial constraints
KW - Firm-level political risk
UR - http://www.scopus.com/inward/record.url?scp=85125494447&partnerID=8YFLogxK
U2 - 10.1007/s11156-022-01049-9
DO - 10.1007/s11156-022-01049-9
M3 - Article
VL - 59
SP - 311
EP - 337
JO - Review of Quantitative Finance and Accounting
JF - Review of Quantitative Finance and Accounting
SN - 0924-865X
ER -