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Pandemic effect on corporate financial asset holdings: Precautionary or return-chasing?
Haoyu Gao1, Huiyu Wen1, Xingjian Wang1
1School of Finance, Renmin University of China, Beijing, China.
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.
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