Uncertainty of economic policy and competitive effect of cash holdings

Abstract

Based on the data of China manufacturing listed companies from 2006 to 2018, this paper studies the influence of economic policy uncertainty on the competitive effect of cash holding through capital investment. The results show that cash holding has a positive competitive effect, and capital investment plays an intermediary role in the competitive effect. The positive competition effect of cash holding is stronger when the uncertainty of economic policy is low than when the uncertainty of economic policy is high, and the uncertainty of economic policy strengthened the intermediary role of capital investment in the positive competition effect of cash holding. The conclusion of this paper provides a new way to understand the increasing cash holdings of enterprises, and has guiding significance for enterprises to make cash holdings strategy under the uncertainty of different economic policies.