The Impact Of Economic Policy Uncertainty On Corporate Cash Holdings

In recent years,trade disputes between China and US,COVID-19 and other events have caused a huge impact on the global economy,exacerbating the uncertainty of the economic policies of various countries.In this context,the impact of economic policy uncertainty on corporate financial decisions was studied in this paper from the corporate cash holdings perspective.Based on the public data of 3,585 A-share companies from 2006 to 2020,conclusions can be obtained after empirical test.Firstly,enterprises will increase their cash holdings if the uncertainty of economic policy increases.And this conclusion is still valid after robustness test and endogenous analysis.Secondly,non-state-owned,without political connection or weak bank relationship enterprises are more sensitive to the uncertainty of economic policy based on the heterogeneity analysis of financing constraints.That is,when the uncertainty of economic policy increases,such enterprises will be more inclined to increase cash holdings.Thirdly,it is also found that increasing cash holdings can reduce the negative impact of economic policy uncertainty on operating performance through the analysis of the economic consequences of cash holdings.And finally,this paper puts forward policy suggestions from three aspects,government departments,banking departments and enterprises themselves:the government should adopt a more stable way to revise the policy,so that enterprises can make strategic adjustment in advance.At the same time,the government and banks should ensure the fairness and efficiency of credit resource allocation to help small and medium-sized enterprises resist the negative impact of economic policy uncertainty.Enterprises themselves should be more sensitive to policy and develop more inclusive business strategies to improve risk tolerance.