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Mohamed Arouri, Hayet Ben Haj Hamida, Issam Mejri and Srdjan Redzepagic
''Drivers of cash holdings value: does economic policy uncertainty matter?''
( 2023, Vol. 43 No.1 )
This paper investigates whether economic policy uncertainty (EPU) affects the way investors value firms' cash holdings. It contributes to two ongoing parallel groups of research studies: studies on the financial impacts of economic policy uncertainty and studies on the drivers of corporate cash holdings. We test for linear and nonlinear causal relationships based on data on firms from S&P500 over the period 2000-2017. Our findings show that while cash holdings increase the firm's market value, economic policy uncertainty reduces it, and its impact is persistent. Moreover, it seems that investors price more cash holdings during periods of high uncertainty and that the cash-EPU-firms value relationship is rather nonlinear.
Keywords: Cash holdings, Economic policy uncertainty, Nonlinear models
JEL: G1 - General Financial Markets
F3 - International Finance: General
Manuscript Received : Mar 20 2022 Manuscript Accepted : Mar 30 2023

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