Economic policy uncertainty and corporate leverage - does cash holdings matter? Evidence from the U.S.

References

• Akron, S., Demir, E., Díez-Esteban, J. M., & García-Gómez, C. D. (2020). Economic policy uncertainty and corporate investment: Evidence from the U.S. hospitality industry. Tourism Management, 77(October 2019), 104019. https://doi.org/10.1016/j.tourman.2019.104019
   Google Scholar
• An, H., Chen, Y., Luo, D., & Zhang, T. (2016). Political uncertainty and corporate investment: Evidence from China. Journal of Corporate Finance, 36(2014), 174–28. https://doi.org/10.1016/j.jcorpfin.2015.11.003
   Google Scholar
• Asimakopoulos, P., Asimakopoulos, S., & Li, X. (2023). The combined effects of economic policy uncertainty and environmental, social, and governance ratings on leverage. European Journal of Finance, 1–23. https://doi.org/10.1080/1351847X.2022.2150559
   Web of Science ®Google Scholar
• Athari, S. A., & Bahreini, M. (2022). Does economic policy uncertainty impact firms’ capital structure policy? Evidence from Western European economies. Environmental Science and Pollution Research, 30(13), 37157–37173. https://doi.org/10.1007/s11356-022-24846-0
   PubMed Web of Science ®Google Scholar
• Bajaj, Y., Kashiramka, S., & Singh, S. (2021). Economic policy uncertainty and leverage dynamics: Evidence from an emerging economy. International Review of Financial Analysis, 77(May), 101836. https://doi.org/10.1016/j.irfa.2021.101836
   Google Scholar
• Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593–1636. https://doi.org/10.1093/qje/qjw024
   Web of Science ®Google Scholar
• Baker, M., & Wurgler, J. (2002). Market timing and capital structure. The Journal of Finance, 57(1), 1–32. https://doi.org/10.1111/1540-6261.00414
   Web of Science ®Google Scholar
• Bates, T. W., Kahle, K. M., & Stulz, R. M. (2009). Why do U.S. firms hold so much more cash than they used to? The Journal of Finance, 64(5), 1985–2021. https://doi.org/10.1111/j.1540-6261.2009.01492.x
   Web of Science ®Google Scholar
• Benkraiem, R., Lakhal, F., & Zopounidis, C. (2020). International diversification and corporate cash holdings behavior: What happens during economic downturns? Journal of Economic Behavior and Organization, 170(xxxx), 362–371. https://doi.org/10.1016/j.jebo.2019.12.016
   Google Scholar
• Bermpei, T., Kalyvas, A. N., Neri, L., & Russo, A. (2021). Does economic policy uncertainty matter for financial reporting quality? Evidence from the United States. Review of Quantitative Finance & Accounting, 58(2), 795–845. https://doi.org/10.1007/s11156-021-01010-2
   Web of Science ®Google Scholar
• Chen, R., El Ghoul, S., Guedhami, O., & Wang, H. (2017). Do state and foreign ownership affect investment efficiency? Evidence from privatizations. Journal of Corporate Finance, 42, 408–421. https://doi.org/10.1016/j.jcorpfin.2014.09.001
   Web of Science ®Google Scholar
• Cheng, C. H. J., Chiu, C. W.Hankins, W. B., & Stone, A. L. (2018). Partisan conflict, policy uncertainty and aggregate corporate cash holdings. Journal of Macroeconomics, 58(August), 78–90. https://doi.org/10.1016/j.jmacro.2018.08.010
   Google Scholar
• Chen, P. F., Lee, C. C., & Zeng, J. H. (2019). Economic policy uncertainty and firm investment: Evidence from the U.S. market. Applied Economics, 51(31), 3423–3435. https://doi.org/10.1080/00036846.2019.1581909
   Web of Science ®Google Scholar
• Chen, S., Wang, Y., Albitar, K., & Huang, Z. (2021). Does ownership concentration affect corporate environmental responsibility engagement? The mediating role of corporate leverage. Borsa Istanbul Review, 21, S13–S24. https://doi.org/10.1016/j.bir.2021.02.001
   Web of Science ®Google Scholar
• Davis, S. (2016). An index of global economic policy uncertainty. National Bureau of Economic Research. (22740). https://doi.org/10.3386/w22740
   Google Scholar
• Demir, E., & Ersan, O. (2017). Economic policy uncertainty and cash holdings: Evidence from BRIC countries. Emerging Markets Review, 33, 189–200. https://doi.org/10.1016/j.ememar.2017.08.001
   Web of Science ®Google Scholar
• Demir, E., Gozgor, G., Lau, C. K. M., & Vigne, S. A. (2018). Does economic policy uncertainty predict the Bitcoin returns? An empirical investigation. Finance Research Letters, 26(January), 145–149. https://doi.org/10.1016/j.frl.2018.01.005
   Google Scholar
• Ding, N., Bhat, K., & Jebran, K. (2020). Debt choice, growth opportunities and corporate investment: Evidence from China. Financial Innovation, 6(1), 1–22. https://doi.org/10.1186/s40854-020-00194-1
   Web of Science ®Google Scholar
• Dittmar, A., & Mahrt-Smith, J. (2007). Corporate governance and the value of cash holdings. Journal of Financial Economics, 83(3), 599–634. https://doi.org/10.1016/j.jfineco.2005.12.006
   Web of Science ®Google Scholar
• Dittmar, A., Mahrt-Smith, J., & Servaes, H. (2003). International corporate governance and corporate cash holdings. The Journal of Financial and Quantitative Analysis, 38(1), 111. https://doi.org/10.2307/4126766
   Web of Science ®Google Scholar
• Fang, L., Yu, H., & Li, L. (2017). The effect of economic policy uncertainty on the long-term correlation between U.S. stock and bond markets. Economic Modelling, 66(June), 139–145. https://doi.org/10.1016/j.econmod.2017.06.007
   Google Scholar
• Feng, X., Lo, Y. L., & Chan, K. C. (2019). Impact of economic policy uncertainty on cash holdings: Firm-level evidence from an emerging market. Asia-Pacific Journal of Accounting and Economics, 1–23. https://doi.org/10.1080/16081625.2019.1694954
   Web of Science ®Google Scholar
• Frésard Laurent, L., & Salva, C. (2010). The value of excess cash and corporate governance: Evidence from U.S. cross-listings. Journal of Financial Economics, 98(2), 359–384. https://doi.org/10.1016/j.jfineco.2010.04.004
   Web of Science ®Google Scholar
• Gulen, H., & Ion, M. (2016). Policy uncertainty and corporate investment. Review of Financial Studies, 29(3), 523–564. https://doi.org/10.1093/rfs/hhv050
   Web of Science ®Google Scholar
• Harford, J., Mansi, S. A., & Maxwell, W. F. (2012). Corporate governance and firm cash holdings in the U.S. Corporate Governance: Recent Developments and New Trends, 9783642315, 107–138. https://doi.org/10.1007/978-3-642-31579-4_5
   Google Scholar
• Hu, S., & Gong, D. (2019). Economic policy uncertainty, prudential regulation and bank lending. Finance Research Letters, 29(August), 373–378. https://doi.org/10.1016/j.frl.2018.09.004
   Google Scholar
• Ilyas, M., Khan, A., Nadeem, M., & Suleman, M. T. (2021). Economic policy uncertainty, oil price shocks and corporate investment: Evidence from the oil industry. Energy Economics, 97, 105193. https://doi.org/10.1016/j.eneco.2021.105193
   Web of Science ®Google Scholar
• Im, H. J., Kang, Y., & Shon, J. (2020). How does uncertainty influence target capital structure? Journal of Corporate Finance, 64(December 2018), 101642. https://doi.org/10.1016/j.jcorpfin.2020.101642
   Google Scholar
• Istiak, K., & Serletis, A. (2018). Economic policy uncertainty and real output: Evidence from the G7 countries. Applied Economics, 50(39), 4222–4233. https://doi.org/10.1080/00036846.2018.1441520
   Web of Science ®Google Scholar
• Istiak, K., & Serletis, A. (2020). Risk, uncertainty, and leverage. Economic Modelling, 91(May), 257–273. https://doi.org/10.1016/j.econmod.2020.06.010
   PubMedGoogle Scholar
• Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance. American Economic Review, 76(2), 323–329.
   Web of Science ®Google Scholar
• Jensen, N., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and capital structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
   Web of Science ®Google Scholar
• Jumah, Z., Younas, Z. I., & Al-Faryan, M. A. S. (2022). Economic policy uncertainty, corporate diversification, and corporate investment. Applied Economics Letters, 1–11. https://doi.org/10.1080/13504851.2022.2106028
   Web of Science ®Google Scholar
• Kayhan, A., & Titman, S. (2007). Firms’ histories and their capital structures. Journal of Financial Economics, 83(1), 1–32. https://doi.org/10.1016/j.jfineco.2005.10.007
   Web of Science ®Google Scholar
• Khan, M. A., Qin, X., & Jebran, K. (2020). Uncertainty and leverage nexus: Does trade credit matter? Eurasian Business Review, 10(3), 355–389. https://doi.org/10.1007/s40821-020-00159-5
   Web of Science ®Google Scholar
• Kido, Y. (2016). On the link between the U.S. economic policy uncertainty and exchange rates. Economics Letters, 144, 49–52. https://doi.org/10.1016/j.econlet.2016.04.022
   Web of Science ®Google Scholar
• Kieschnick, R., & Moussawi, R. (2018). Firm age, corporate governance, and capital structure choices. Journal of Corporate Finance, 48, 597–614. https://doi.org/10.1016/j.jcorpfin.2017.12.011
   Web of Science ®Google Scholar
• Kim, C.-S., Mauer, D. C., & Sherman, A. E. (1998). The determinants of corporate liquidity: Theory and evidence. The Journal of Financial and Quantitative Analysis, 33(3), 335. https://doi.org/10.2307/2331099
   Web of Science ®Google Scholar
• Lee, C. C., Lee, C. C., Zeng, J. H., & Hsu, Y. L. (2017). Peer bank behavior, economic policy uncertainty, and leverage decision of financial institutions. Journal of Financial Stability, 30, 79–91. https://doi.org/10.1016/j.jfs.2017.04.004
   Web of Science ®Google Scholar
• Lemmon, M. L., Roberts, M. R., & Zender, J. F. (2008). Back to the beginning: Persistence and the cross-section of corporate capital structure. The Journal of Finance, 63(4), 1575–1608. https://doi.org/10.1111/j.1540-6261.2008.01369.x
   Web of Science ®Google Scholar
• Li, X. (2019). Economic policy uncertainty and corporate cash policy: International evidence. Journal of Accounting and Public Policy, 38(6), 106694. https://doi.org/10.1016/j.jaccpubpol.2019.106694
   Web of Science ®Google Scholar
• Li, F., Liang, T., & Zhang, H. (2021). Does economic policy uncertainty affect cross-border M&As? —— a data analysis based on Chinese multinational enterprises. International Review of Financial Analysis, 73, 101631. https://doi.org/10.1016/j.irfa.2020.101631
   Web of Science ®Google Scholar
• Li, X. M., & Qiu, M. (2021). The joint effects of economic policy uncertainty and firm characteristics on capital structure: Evidence from U.S. firms. Journal of International Money and Finance, 110, 102279. https://doi.org/10.1016/j.jimonfin.2020.102279
   Web of Science ®Google Scholar
• Liu, Y., Li, J., Liu, G., & Lee, C.-C. (2021). Economic policy uncertainty and firm’s cash holdings in China: The key role of asset reversibility. Journal of Asian Economics, 74, 101318. https://doi.org/10.1016/j.asieco.2021.101318
   Web of Science ®Google Scholar
• Liu, G., & Zhang, C. (2020). Economic policy uncertainty and firms’ investment and financing decisions in China. China Economic Review. https://doi.org/10.1016/j.chieco.2019.02.007
   Google Scholar
• Liu, L., & Zhang, T. (2015). Economic policy uncertainty and stock market volatility. Finance Research Letters, 15, 99–105. https://doi.org/10.1016/j.frl.2015.08.009
   Web of Science ®Google Scholar
• Loncan, T. (2020). Foreign institutional ownership and corporate cash holdings: Evidence from emerging economies. International Review of Financial Analysis, 71(December), 101295. https://doi.org/10.1016/j.irfa.2018.12.003
   Google Scholar
• Lv, M., & Bai, M. (2019). Political uncertainty and corporate debt financing: Empirical evidence from China. Applied Economics, 51(13), 1433–1449. https://doi.org/10.1080/00036846.2018.1527455
   Web of Science ®Google Scholar
• Makololo, P., & Seetharam, Y. (2020). The effect of economic policy uncertainty and herding on leverage: An examination of the BRICS countries. Cogent Economics & Finance, 8(1), 1821482. https://doi.org/10.1080/23322039.2020.1821482
   Web of Science ®Google Scholar
• Menéndez-Alonso, E. J. (2003). Does diversification strategy matter in explaining capital structure? Some evidence from Spain. Applied Financial Economics, 13(6), 427–430. https://doi.org/10.1080/09603100210150930
   Google Scholar
• Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 575. https://doi.org/10.2307/2327916
   Web of Science ®Google Scholar
• Pan, W. F., Wang, X., & Yang, S. (2019). Debt maturity, leverage, and political uncertainty. The North American Journal of Economics & Finance, 50(November 2018), 100981. https://doi.org/10.1016/j.najef.2019.04.024
   Google Scholar
• Pástor, Ľ., & Veronesi, P. (2013). Political uncertainty and risk premia. Journal of Financial Economics, 110(3), 520–545. https://doi.org/10.1016/j.jfineco.2013.08.007
   Web of Science ®Google Scholar
• Phan, H. V., Nguyen, N. H., Nguyen, H. T., & Hegde, S. (2019). Policy uncertainty and firm cash holdings. Journal of Business Research, 95(March 2018), 71–82. https://doi.org/10.1016/j.jbusres.2018.10.001
   Google Scholar
• Pinkowitz, L., Stulz, R., & Williamson, R. (2006). Does the contribution of corporate cash holdings and dividends to firm value depend on governance? A cross-country analysis. The Journal of Finance, 61(6), 2725–2751. https://doi.org/10.1111/j.1540-6261.2006.01003.x
   Web of Science ®Google Scholar
• Preacher, K. J., & Kelley, K. (2011). Effect size measures for mediation models: Quantitative strategies for communicating indirect effects. Psychological Methods, 16(2), 93–115. https://doi.org/10.1037/a0022658
   PubMed Web of Science ®Google Scholar
• Prüser, J., & Schlösser, A. (2020). The effects of economic policy uncertainty on European economies: Evidence from a TVP-FAVAR. Empirical Economics, 58(6), 2889–2910. https://doi.org/10.1007/s00181-018-01619-8
   Web of Science ®Google Scholar
• Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70(1), 41–55. https://doi.org/10.1093/biomet/70.1.41
   Web of Science ®Google Scholar
• Schwarz, L. A. D., & Dalmácio, F. Z. (2020, June). The relationship between economic policy uncertainty and corporate leverage: Evidence from Brazil. Finance Research Letters, 40, 101676. https://doi.org/10.1016/j.frl.2020.101676
   Web of Science ®Google Scholar
• Sobel, M. E. (1982). Asymptotic confidence intervals for indirect effects in structural equation models. Sociological Methodology, 13, 290. https://doi.org/10.2307/270723
   Google Scholar
• Suh, H., & Yang, J. Y. (2021). Global uncertainty and global economic policy uncertainty: Different implications for firm investment. Economics Letters, 200, 109767. https://doi.org/10.1016/j.econlet.2021.109767
   Web of Science ®Google Scholar
• Su, X., Zhou, S., Xue, R., & Tian, J. (2020). Does economic policy uncertainty raise corporate precautionary cash holdings? Evidence from China. Accounting and Finance, 60(5), 4567–4592. https://doi.org/10.1111/acfi.12674
   Web of Science ®Google Scholar
• Tabash, M. I., Farooq, U., Ashfaq, K., & Tiwari, A. K. (2022). Economic policy uncertainty and financing structure: A new panel data evidence from selected Asian economies. Research in International Business and Finance, 60(October 2021), 101574. https://doi.org/10.1016/j.ribaf.2021.101574
   Google Scholar
• Wang, Y., Chen, C. R., & Huang, Y. S. (2014). Economic policy uncertainty and corporate investment: Evidence from China. Pacific Basin Finance Journal, 26, 227–243. https://doi.org/10.1016/j.pacfin.2013.12.008
   Web of Science ®Google Scholar
• Xu, Z. (2019). Economic policy uncertainty, cost of capital, and corporate innovation. Journal of Banking & Finance, 105698. https://doi.org/10.1016/j.jbankfin.2019.105698
   Web of Science ®Google Scholar
• Xu, N., Chen, Q., Xu, Y., & Chan, K. C. (2016). Political uncertainty and cash holdings: Evidence from China. Journal of Corporate Finance, 40, 276–295. https://doi.org/10.1016/j.jcorpfin.2016.08.007
   Web of Science ®Google Scholar
• Yang, C. C., Baker, H. K., Chou, L. C., & Lu, B. W. (2009). Does switching from NASDAQ to the NYSE affect investment-cash flow sensitivity? Journal of Business Research, 62(10), 1007–1012. https://doi.org/10.1016/j.jbusres.2008.05.006
   Web of Science ®Google Scholar
• Yu, H., Fang, L., Du, D., & Yan, P. (2017). How EPU drives long-term industry beta. Finance Research Letters, 22, 249–258. https://doi.org/10.1016/j.frl.2017.05.012
   Web of Science ®Google Scholar
• Zhang, G., Han, J., Pan, Z., & Huang, H. (2015). Economic policy uncertainty and capital structure choice: Evidence from China. Economic Systems, 39(3), 439–457. https://doi.org/10.1016/j.ecosys.2015.06.003
   Web of Science ®Google Scholar
• Zhao, X., Lynch, J. G., & Chen, Q. (2010). Reconsidering Baron and Kenny: Myths and truths about mediation analysis. Journal of Consumer Research, 37(2), 197–206. https://doi.org/10.1086/651257
   Web of Science ®Google Scholar
• Zhou, M., Li, K., & Chen, Z. (2021). Corporate governance quality and financial leverage: Evidence from China. International Review of Financial Analysis, 73(October 2020), 101652. https://doi.org/10.1016/j.irfa.2020.101652
   Google Scholar