Abstract
Using a sample of firms from 8 East Asian countries, we document the corporate policy (cash holding, investment, financing, and payout) response to the Asian Financial Crisis of 1997-1998. Following the crisis, we find significant evidence of a build-up of cash holdings, a fall in capital spending, decreases in sourcing funds from capital markets, and a reduction in dividend payout offset with an increase in the use of repurchases. Our results suggest that such corporate policies used by Asian firms were designed to improve their financial strength by increasing financial flexibility.
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