Economic Policy Uncertainty and “Double High Phenomenon”

Abstract

The “double high phenomenon” is a phenomenon that listed companies hold high cash and high short-term loans at the same time. This paper takes China’s A-share listed companies from 2007 to 2018 as samples, and tests the impact of economic policy uncertainty on the “double high phenomenon” from the external macro environment of enterprises. It is found that there is a positive correlation between economic policy uncertainty and the “double high phenomenon”, that is, the higher the uncertainty of economic policy, the higher the probability of “double high phenomenon”. In order to ensure the reliability of the research results, this paper carries out a series of robustness tests, including replacing the measurement method of “double high phenomenon” variables and economic policy uncertainty variables, replacing the regression econometric model, distinguishing the duration of “double high phenomenon”, adding macro economic variables, and using the instrumental variable method, and the conclusion has not changed. In order to better understand the positive relationship between economic policy uncertainty and the “double high phenomenon”, this paper explores the transmission path of economic policy uncertainty on the “double high phenomenon”. It is found that economic policy uncertainty increases the probability of “double high phenomenon” by increasing the fluctuation of operating cash flow, financing costs and financial risks. In addition, further research on firm heterogeneity also finds that the positive relationship between economic policy uncertainty and the “double high phenomenon” is affected by the competitive position of product market, financing constraints and corporate governance level. That is to say, the positive effect of economic policy uncertainty on the “double high phenomenon” will be alleviated with the increase of product market competition, the alleviation of financing constraints and the improvement of corporate governance.The possible contributions of this paper are as follows: First, compared with the existing research about the impact of economic policy uncertainty on cash holding or financing, this paper focuses on the simultaneous “double high” impact of economic policy on corporate cash holding and short-term financing, expands the research on the economic consequences of economic policy uncertainty from the perspective of “double high phenomenon”, and supplements the corresponding research literature. Second, the existing research about the causes of “double high phenomenon” mainly focuses on the characteristics of the enterprise itself and governance. This paper focuses on the external macro environment of enterprises and studies the causes of “double high phenomenon” based on the uncertainty of economic policy, which enriches the research on the causes of “double high phenomenon”. Third, the conclusions of this paper will help policy-makers and accounting information users to understand the “double high phenomenon” and the impact of economic policy uncertainty on the behavior choice of micro economic entities more effectively, and enrich the research on the impact of macroeconomic policy on micro enterprise behavior decision-making.