Economic policy uncertainty and cash holdings: European evidence

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School of Business | Bachelor's thesis
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Authors

Date

2020

Department

Rahoituksen laitos

Major/Subject

Mcode

Degree programme

Rahoitus

Language

en

Pages

20+4

Series

Abstract

This research examines the effect economic policy uncertainty has on corporate cash holdings in Europe. I perform a multiregression analysis controlling for common firm, market, time effects. In addition to this, I perform several simple regressions to address concerns about the robustness of my results. My results indicate that economic policy uncertainty economically and statistically significantly affects cash holdings. An increase of 10% in the EPU index (Baker et al., 2016) results in a 0.66% change in cash holdings with a t-value of 6.14. The increase in cash holdings lead to substantial costs for corporations and societies due to foregone investment opportunities. Therefore, governments and regulatory institutions should aim to build strategies on how to minimize future economic policy uncertainty.

Description

Thesis advisor

Ungeheuer, Michael

Keywords

Economic policy uncertainty, Corporate, Cash holdings, Europe

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Citation

Permanent link to this item

https://urn.fi/URN:NBN:fi:aalto-2020120656098

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[kand] Kauppakorkeakoulu / BIZ