Abstract
Nowadays, non-financial corporations invest heavily in financial assets, questioning the traditional boundaries of non-financial firms. We investigate how economic policy uncertainty affects firms’ holding of non-currency financial assets and portfolios of such assets in China. We find that economic policy uncertainty has a negative effect on firms’ non-currency financial asset allocation, and the effect is more pronounced for less financially constrained firms. This result implies that other than precautionary saving,speculation is the underlying motive that drives firms to increase their non-currency financial asset holdings. Further investigation shows that economic policy uncertainty has a negative but weaker impact on financial asset holdings for firms in industries with intensive competition. The results are robust to the use of a variety of specifications and estimation methods.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.