Transformations  in
Business & Economics

TRADE POLICY UNCERTAINTIES AND CORPORATE CASH HOLDINGS⁵
Jingjuan Ma, Lijuan Zhao, Dongdong Li, Zhongxin Wu

ABSTRACT: Owing to the rise of trade protectionism, the increasing trade policy uncertainties have aroused extensive attention from the academic and practice fields. However, the influences of trade policy uncertainties on the financial behaviors of listed companies still await further exploration. To discuss the relationship between trade policy uncertainties and corporate cash holdings as well as the influencing mechanism, using the data of A-share listed companies in China during 2007-2020 and the OLS regression analysis model, the influencing mechanism of trade policy uncertainties on corporate cash holding levels was empirically tested. Results reveal that trade policy uncertainties lead to the elevation of corporate cash holding levels, which remain robust and reliable after a series of endogeneity tests. Moreover, the path for trade policy uncertainties to increase corporate cash holding levels is influenced by financing constraints. The positive correlation between trade friction and corporate cash holdings is also weak for state-owned enterprises, enterprises with relatively young management layers, or those with a high market position. The obtained conclusions provide a significant reference for emerging capital markets to prove the influences of trade policy uncertainties on corporate cash holdings and render management enlightenments for enterprises to cope with macro-environmental changes.

KEYWORDS:  trade policies, uncertainties, financing constraints, cash holdings.

JEL classification:  D22, F14, G32.

⁵Acknowledgments:  This study was supported by the Fundamental Research Funds for the Central Universities (201911134).