Cash holding Prior and Since COVID-19: Chinese Managerial Sentiments
1 Pages Posted: 27 Apr 2022
Date Written: April 24, 2022
Abstract
Since its first occurance in January 2020 COVID-19 has spread globally. In order to contrain the COVID 19, China has adopted a zero-covid policy and consequently contributed to local economic crises in the form of slowed industry growth. Consequentily in the first Quarter of 2020, this crisis leads managerial sentiment to turn negative, resulting in decline in fixed-asset investments as well as capital expendituers. To deal with this uncertainty, managers can adjust cash holdings based on their overall senitment on the conditions of pandamic crisis. This paper considers COVID-19 pandemic as exogenous shock to understand the impact of managerial sentiment prior and since covid on corporate cash holding and investments.
Excluding medical and financial sectors, Chinese listed firms‘ cashhoding and investment changes as well as managements‘ sentiment before the first quarter (Q1) 2020 and after Q1 2020. Our findings indicate that from Q1 2020 onwards firms with management’s optimistic sentiment hold more cash at the same time decrease their capital investment. While this effect is not significant prior COVID-19.
Our results suggest that managerial sentiment since COVID-19 outbreak carries valuable infomration for investors to predict future cashholding and future investments. That is, managers with positive sentiment will accumulate cash to be ready enter investment opportunties while managers with negative sentiment and belief about future investments will reduce their cashholding. Practical and theoretical contributions as well as limitations of this paper are provided.
Keywords: Cash, COVID-19, Epidemics, Epidemiology, Virus, Pandemic, Liquid assets, Liquidity management, Management Sentiment
JEL Classification: G30, G31, G32, G38
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