Corporate financial asset holdings under economic policy uncertainty: Precautionary saving or speculating?
Jialin Huang,
Yu Luo and
Yuchao Peng
International Review of Economics & Finance, 2021, vol. 76, issue C, 1359-1378
Abstract:
Non-financial corporations invest heavily in financial assets nowadays, raising questions about the traditional boundaries of non-financial firms. We investigate how economic policy uncertainty affects firms’ holdings of non-currency financial assets and portfolios in China. We find that economic policy uncertainty has a negative effect on firms’ non-currency financial asset allocation, especially for less financially constrained firms. This result implies that other than precautionary saving, speculation is the underlying motive that drives firms to increase their non-currency financial asset holdings. Furthermore, economic policy uncertainty has a negative but weaker impact on financial asset holdings for firms in industries/regions with intensive competition.
Keywords: Economic policy uncertainty; Financial asset; Financial constraint; Speculation; Precautionary saving (search for similar items in EconPapers)
JEL-codes: E60 G18 G31 G32 G38 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (12)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:76:y:2021:i:c:p:1359-1378
DOI: 10.1016/j.iref.2019.11.018
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