Impact of Sudden Public Incidents, Corporate Cash Holdings and Investment Expenditure

Bingbin Dai¹, Mingrui Zhu¹ and Yi Suo^1,

¹Beijing International Studies University,Beijing,China

Cite this paper:
Bingbin Dai, Mingrui Zhu and Yi Suo. Impact of Sudden Public Incidents, Corporate Cash Holdings and Investment Expenditure. Journal of Business and Management Sciences. 2025; 13(1):17-23. doi: 10.12691/jbms-13-1-3

Abstract

Corporate investment is highly sensitive to changes in supply and demand as well as economic cycles. The credit crisis and the uncertainties in the external environment can also affect a company's investment behavior. The cash holdings of an enterprise can help withstand operational risks during sudden crises and play a certain role in maintaining investment. This paper takes A-share listed companies from 2018 to 2021 as samples, and uses the DID (Difference-in-Differences) model to test the buffering effect of the cash holding level of enterprises before the COVID-19 pandemic on their investment behavior during the pandemic, and also conducts a heterogeneity test. The results show that after the pandemic, the investment expenditure of enterprises has dropped significantly, and the high cash holding policy of enterprises before the pandemic can have a certain buffering effect on their investment expenditure. Further research reveals that for enterprises with greater financing constraints, the cash holding level has a stronger buffering effect on the decline in investment expenditure during the pandemic; while for enterprises with a higher degree of operation in overseas markets, the buffering effect of the cash holding level on investment expenditure is weaker.

Keywords:
Cash Holdings Investment Expenditure Impact of Sudden Public Incidents COVID-19 Pandemic

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