This study investigates whether geopolitical risks influence Chinese firms' cash holdings. We find that firms tend to hoard more cash as a precautionary measure when faced with geopolitical risk. Moreover, firms that are financially constrained maintain cash reserves as buffer against geopolitical risk. Finally, firms in manufacturing-related industries tend to save more cash and protect themselves from risk spillover as China's manufacturing sector has slowed down with the current China–United States trade war. Our research notes that policymakers and investors can pay more attention to the effect of geopolitical risk on enterprises' cash reserves.
|期刊||Pacific Basin Finance Journal|
|出版狀態||已出版 - 2月 2021|