Does firm-level political risk affect cash holdings?

Journal article

Hasan, S., Alam, M., Paramati, S. and Islam, S. 2022. Does firm-level political risk affect cash holdings? Review of Quantitative Finance and Accounting. 59, p. 311–337. https://doi.org/10.1007/s11156-022-01049-9
AuthorsHasan, S., Alam, M., Paramati, S. and Islam, S.
Abstract

We investigate whether firm-level political risk affects corporate cash holdings. Taking a sample of 5,424 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.

KeywordsFirm-level political risk; cash holdings; financial constraints; business cycle
Year2022
JournalReview of Quantitative Finance and Accounting
Journal citation59, p. 311–337
PublisherSpringer
ISSN1573-7179
Digital Object Identifier (DOI)https://doi.org/10.1007/s11156-022-01049-9
Web address (URL)https://link.springer.com/article/10.1007/s11156-022-01049-9
https://centaur.reading.ac.uk/103435/
Accepted author manuscript
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All rights reserved
File Access Level
Open
Output statusPublished
Publication dates
Online02 Mar 2022
Publication process dates
Accepted19 Jan 2022
Deposited11 Dec 2023
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