Domestic Economic Policy Uncertainty, US Macroeconomic Uncertainty and Corporate Cash Holdings: International Evidence

Abstract

This study examines the impact of two different types of uncertainty, which are domestic economic policy uncertainty and macroeconomic uncertainty stemming from the United States (US) on corporate cash holdings. Using a sample of 18 countries from 2003 to 2023, we find that both types of uncertainty positively associated with corporate cash holdings due to precautionary motives. Our results demonstrate that the US macroeconomic uncertainty has a greater influence over domestic economic policy uncertainty on corporate cash holdings decision. Further analysis indicates that the influences of both types of uncertainty on corporate cash holdings are more pronounced in developed countries.