Pandemic effect on corporate financial asset holdings: Precautionary or return-chasing?

ABSTRACT: This study empirically investigates whether and how the COVID-19 pandemic affects corporate financial asset holdings. We find that firms with higher pandemic exposure are less likely to hold financial assets. Mechanism analyses suggest that the return-chasing rationale dominates the precautionary motive concerning the pandemic effect on corporate financial asset holdings. Furthermore, firms prefer to liquidate highly liquid financial assets to fill the pandemic-induced liquidity shortage. This study contributes to the economic consequences of the COVID-19 pandemic regarding corporate portfolio choice, and sheds light on corporate resilience to crises.

SUBMITTER: Gao H 

PROVIDER: S-EPMC9385575 | biostudies-literature | 2022 Dec

REPOSITORIES: biostudies-literature