The effect of economic policy uncertainty on value of cash by financial constraint during the post-crisis period
| Variables | KZ index | WW index | Firm size | |||
|---|---|---|---|---|---|---|
| Low | High | Low | High | Large | Small | |
| Intercept | 1.9086*** (5.73) | 1.0306*** (2.84) | 0.0020** (2.30) | 0.0070*** (3.72) | 1.8025*** (7.11) | 2.7450*** (6.00) |
| EPU1t × EXCi,t | 0.0034*** (2.79) | 0.0044*** (2.59) | −0.0001 (−0.11) | 0.0070*** (3.25) | 0.0020** (2.28) | 0.0067*** (3.49) |
| EXCi,t | 0.0063 (0.03) | 0.4521** (2.56) | 1.5987** (2.24) | −3.4905*** (−18.02) | 0.2455* (1.87) | 0.8797*** (4.47) |
| EPU1t | −0.0004 (−0.22) | 0.0082*** (3.68) | 0.2870** (2.22) | 0.7752*** (4.02) | −0.0012 (−1.13) | 0.0083*** (3.67) |
| ENi,t | −1.0801*** (−3.22) | −3.8750*** (−17.12) | 0.2413 (0.77) | 0.8446*** (6.55) | 4.1613*** (8.85) | −3.4315*** (−17.32) |
| dENi,t | 1.2553*** (6.88) | 0.8960*** (5.39) | 1.8176*** (4.47) | −1.0406*** (−7.32) | −0.3075** (−2.17) | 0.8167*** (6.16) |
| dENi,t + 1 | 0.5536** (2.50) | −1.0030*** (−5.45) | 0.6305*** (5.80) | 1.0187*** (9.35) | 3.0249*** (13.42) | −1.0349*** (−7.17) |
| dNAi,t | 0.7796*** (6.48) | 0.7456*** (6.87) | 0.4886*** (4.99) | 1.2251*** (13.36) | 0.1219** (1.96) | 0.9174*** (8.19) |
| dNAi,t + 1 | 0.7684*** (9.04) | 1.2331*** (11.68) | 8.0070*** (10.11) | 3.7589*** (7.45) | 0.1969** (2.46) | 1.2011*** (12.76) |
| RDi,t | 5.6166*** (11.90) | 5.0257*** (6.94) | 9.0352*** (3.25) | 5.0033*** (4.92) | 5.8849*** (5.51) | 3.8438*** (7.33) |
| dRDi,t | 7.1493*** (6.23) | 3.0815** (1.98) | 15.0993*** (5.57) | 8.3691*** (8.07) | 7.6366*** (3.42) | 4.9940*** (4.91) |
| dRDi,t + 1 | 12.1243*** (11.40) | 9.0252*** (5.32) | 5.6439*** (3.59) | 17.2513*** (11.09) | 12.7415*** (5.40) | 8.3741*** (7.60) |
| INi,t | 17.5443*** (9.10) | 9.3041*** (5.80) | −8.3035*** (−2.68) | −17.8582*** (−9.20) | 5.3514*** (5.22) | 18.9171*** (11.37) |
| dINi,t | −13.5644*** (−4.93) | −16.0409*** (−8.03) | 0.0574 (0.80) | −0.5025*** (−3.76) | −4.1574** (−2.38) | −18.6636*** (−9.21) |
| dINi,t + 1 | −0.1771* (−1.74) | −0.3249*** (−2.94) | 19.6909*** (12.39) | 26.1928*** (10.38) | 0.2182*** (2.92) | −0.4258** (−2.55) |
| DVi,t | 18.8544*** (16.29) | 53.9883*** (6.12) | −0.9581 (−0.88) | −8.3586*** (−3.42) | 14.8932*** (10.94) | 24.4272*** (12.70) |
| dDVi,t | −0.0293 (−0.03) | −16.0536*** (−4.26) | 14.1744*** (9.93) | 15.5222*** (7.69) | −2.0077** (−2.11) | −6.8930*** (−3.38) |
| dDVi,t + 1 | 14.4255*** (12.25) | 21.8134*** (6.39) | −0.1347*** (−2.78) | −0.0049 (−0.17) | 10.1555*** (8.51) | 16.3502*** (9.76) |
| dMVi,t | −0.0221 (−0.85) | −0.0102 (−0.26) | 0.2778* (1.92) | 1.6759*** (8.48) | −0.1447*** (−3.13) | −0.0258 (−1.00) |
| ASD | 1.1642*** (8.20) | −0.0670 (−0.25) | 0.0400* (1.79) | −0.2755*** (−6.32) | 0.1237 (0.75) | 1.8760*** (8.94) |
| CRE | −0.1386*** (−5.15) | 0.0720 (1.17) | −0.1365*** (−3.43) | 0.1842*** (2.75) | 0.0464** (2.08) | −0.3074*** (−6.39) |
| ROL | −0.0058 (−0.11) | 0.0341 (0.57) | −0.0051*** (−9.54) | 0.0035*** (3.25) | −0.0965*** (−2.82) | 0.1565** (2.30) |
| PCREt | −0.0011 (−1.55) | −0.0058*** (−3.70) | 0.0003 (0.99) | −0.0009*** (−5.28) | −0.0042*** (−7.36) | 0.0040*** (3.49) |
| MCAPt | −0.0005*** (−4.52) | 0.0005* (1.89) | −0.0918*** (−3.83) | −0.1713*** (−4.91) | 0.0004 (1.06) | −0.0012*** (−6.27) |
| GCAPt | −0.1529*** (−5.18) | −0.0192 (−0.50) | −0.0155*** (−2.66) | 0.0374*** (3.87) | −0.0556** (−2.19) | −0.2339*** (−6.53) |
| GGROt | 0.0258*** (3.38) | −0.0174 (−1.56) | 0.2011 (1.35) | 0.0841 (0.58) | −0.0038 (−0.56) | 0.0380*** (4.05) |
| ASD × EXCi,t | −0.1123 (−0.91) | −0.0841 (−0.55) | 0.0184 (0.84) | 0.0257 (0.72) | 0.2919* (1.70) | 0.2064 (1.29) |
| CRE × EXCi,t | 0.1082*** (4.34) | 0.0499 (1.48) | 0.0289 (1.06) | −0.1412*** (−2.87) | 0.0211 (0.96) | −0.0004 (−0.01) |
| ROL × EXCi,t | −0.0742* (−1.67) | −0.1227*** (−2.81) | −0.0007 (−1.76) | −0.0002 (−0.26) | 0.0707*** (2.84) | −0.1054 (−2.16) |
| PCREt × EXCi,t | −0.0036*** (−5.85) | −0.0014* (−1.97) | −0.0001 (−0.30) | 0.0002 (1.37) | −0.0011** (−2.56) | −0.0001 (−0.09) |
| MCAPt × EXCi,t | 0.0002 (1.31) | 0.0003 (1.52) | −0.0360** (−2.43) | −0.0866*** (−4.22) | −0.0002 (−0.80) | 0.0002 (0.93) |
| GCAPt × EXCi,t | 0.0362* (1.83) | −0.0375*** (−2.00) | −0.0084** (−2.40) | −0.0032 (−0.63) | −0.0353** (−2.28) | −0.1002*** (−4.70) |
| GGROt × EXCi,t | −0.0049 (−1.15) | −0.0157*** (−3.08) | 2.2630*** (8.18) | 1.7347*** (4.75) | −0.0128*** (−3.28) | −0.0040 (−0.74) |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| R2 | 0.3089 | 0.3294 | 0.3107 | 0.3585 | 0.3008 | 0.36 |
| N | 20,846 | 21,004 | 20,885 | 20,911 | 20,897 | 20,897 |
| Variables | KZ index | WW index | Firm size | |||
|---|---|---|---|---|---|---|
| Low | High | Low | High | Large | Small | |
| Intercept | 1.9086*** (5.73) | 1.0306*** (2.84) | 0.0020** (2.30) | 0.0070*** (3.72) | 1.8025*** (7.11) | 2.7450*** (6.00) |
| EPU1 | 0.0034*** (2.79) | 0.0044*** (2.59) | −0.0001 (−0.11) | 0.0070*** (3.25) | 0.0020** (2.28) | 0.0067*** (3.49) |
| EXC | 0.0063 (0.03) | 0.4521** (2.56) | 1.5987** (2.24) | −3.4905*** (−18.02) | 0.2455* (1.87) | 0.8797*** (4.47) |
| EPU1 | −0.0004 (−0.22) | 0.0082*** (3.68) | 0.2870** (2.22) | 0.7752*** (4.02) | −0.0012 (−1.13) | 0.0083*** (3.67) |
| EN | −1.0801*** (−3.22) | −3.8750*** (−17.12) | 0.2413 (0.77) | 0.8446*** (6.55) | 4.1613*** (8.85) | −3.4315*** (−17.32) |
| dEN | 1.2553*** (6.88) | 0.8960*** (5.39) | 1.8176*** (4.47) | −1.0406*** (−7.32) | −0.3075** (−2.17) | 0.8167*** (6.16) |
| dEN | 0.5536** (2.50) | −1.0030*** (−5.45) | 0.6305*** (5.80) | 1.0187*** (9.35) | 3.0249*** (13.42) | −1.0349*** (−7.17) |
| dNA | 0.7796*** (6.48) | 0.7456*** (6.87) | 0.4886*** (4.99) | 1.2251*** (13.36) | 0.1219** (1.96) | 0.9174*** (8.19) |
| dNA | 0.7684*** (9.04) | 1.2331*** (11.68) | 8.0070*** (10.11) | 3.7589*** (7.45) | 0.1969** (2.46) | 1.2011*** (12.76) |
| RD | 5.6166*** (11.90) | 5.0257*** (6.94) | 9.0352*** (3.25) | 5.0033*** (4.92) | 5.8849*** (5.51) | 3.8438*** (7.33) |
| dRD | 7.1493*** (6.23) | 3.0815** (1.98) | 15.0993*** (5.57) | 8.3691*** (8.07) | 7.6366*** (3.42) | 4.9940*** (4.91) |
| dRD | 12.1243*** (11.40) | 9.0252*** (5.32) | 5.6439*** (3.59) | 17.2513*** (11.09) | 12.7415*** (5.40) | 8.3741*** (7.60) |
| IN | 17.5443*** (9.10) | 9.3041*** (5.80) | −8.3035*** (−2.68) | −17.8582*** (−9.20) | 5.3514*** (5.22) | 18.9171*** (11.37) |
| dIN | −13.5644*** (−4.93) | −16.0409*** (−8.03) | 0.0574 (0.80) | −0.5025*** (−3.76) | −4.1574** (−2.38) | −18.6636*** (−9.21) |
| dIN | −0.1771* (−1.74) | −0.3249*** (−2.94) | 19.6909*** (12.39) | 26.1928*** (10.38) | 0.2182*** (2.92) | −0.4258** (−2.55) |
| DV | 18.8544*** (16.29) | 53.9883*** (6.12) | −0.9581 (−0.88) | −8.3586*** (−3.42) | 14.8932*** (10.94) | 24.4272*** (12.70) |
| dDV | −0.0293 (−0.03) | −16.0536*** (−4.26) | 14.1744*** (9.93) | 15.5222*** (7.69) | −2.0077** (−2.11) | −6.8930*** (−3.38) |
| dDV | 14.4255*** (12.25) | 21.8134*** (6.39) | −0.1347*** (−2.78) | −0.0049 (−0.17) | 10.1555*** (8.51) | 16.3502*** (9.76) |
| dMV | −0.0221 (−0.85) | −0.0102 (−0.26) | 0.2778* (1.92) | 1.6759*** (8.48) | −0.1447*** (−3.13) | −0.0258 (−1.00) |
| ASD | 1.1642*** (8.20) | −0.0670 (−0.25) | 0.0400* (1.79) | −0.2755*** (−6.32) | 0.1237 (0.75) | 1.8760*** (8.94) |
| CRE | −0.1386*** (−5.15) | 0.0720 (1.17) | −0.1365*** (−3.43) | 0.1842*** (2.75) | 0.0464** (2.08) | −0.3074*** (−6.39) |
| ROL | −0.0058 (−0.11) | 0.0341 (0.57) | −0.0051*** (−9.54) | 0.0035*** (3.25) | −0.0965*** (−2.82) | 0.1565** (2.30) |
| PCRE | −0.0011 (−1.55) | −0.0058*** (−3.70) | 0.0003 (0.99) | −0.0009*** (−5.28) | −0.0042*** (−7.36) | 0.0040*** (3.49) |
| MCAP | −0.0005*** (−4.52) | 0.0005* (1.89) | −0.0918*** (−3.83) | −0.1713*** (−4.91) | 0.0004 (1.06) | −0.0012*** (−6.27) |
| GCAP | −0.1529*** (−5.18) | −0.0192 (−0.50) | −0.0155*** (−2.66) | 0.0374*** (3.87) | −0.0556** (−2.19) | −0.2339*** (−6.53) |
| GGRO | 0.0258*** (3.38) | −0.0174 (−1.56) | 0.2011 (1.35) | 0.0841 (0.58) | −0.0038 (−0.56) | 0.0380*** (4.05) |
| ASD × EXC | −0.1123 (−0.91) | −0.0841 (−0.55) | 0.0184 (0.84) | 0.0257 (0.72) | 0.2919* (1.70) | 0.2064 (1.29) |
| CRE × EXC | 0.1082*** (4.34) | 0.0499 (1.48) | 0.0289 (1.06) | −0.1412*** (−2.87) | 0.0211 (0.96) | −0.0004 (−0.01) |
| ROL × EXC | −0.0742* (−1.67) | −0.1227*** (−2.81) | −0.0007 (−1.76) | −0.0002 (−0.26) | 0.0707*** (2.84) | −0.1054 (−2.16) |
| PCRE | −0.0036*** (−5.85) | −0.0014* (−1.97) | −0.0001 (−0.30) | 0.0002 (1.37) | −0.0011** (−2.56) | −0.0001 (−0.09) |
| MCAP | 0.0002 (1.31) | 0.0003 (1.52) | −0.0360** (−2.43) | −0.0866*** (−4.22) | −0.0002 (−0.80) | 0.0002 (0.93) |
| GCAP | 0.0362* (1.83) | −0.0375*** (−2.00) | −0.0084** (−2.40) | −0.0032 (−0.63) | −0.0353** (−2.28) | −0.1002*** (−4.70) |
| GGRO | −0.0049 (−1.15) | −0.0157*** (−3.08) | 2.2630*** (8.18) | 1.7347*** (4.75) | −0.0128*** (−3.28) | −0.0040 (−0.74) |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| 0.3089 | 0.3294 | 0.3107 | 0.3585 | 0.3008 | 0.36 | |
| 20,846 | 21,004 | 20,885 | 20,911 | 20,897 | 20,897 | |
Note(s): The dependent variable is MVt. Xt is the value of variable X in year t. dXt is the annual change in X in year t. dXt + 1 is the annual change in X in year t + 1. MV is market value. EPU1 is economic policy uncertainty. EXC is excess cash. EN is earnings before interest and extraordinary items. NA is net assets calculated by total assets minus total cash and short-term investment. RD is research and development expenditure. IN is interest expense. DV is cash dividend. All firm-level variables except EXC are deflated by net assets. ASD is anti-self-dealing index. CRE is revised creditor right index. ROL is rule of law. PCRE is private credit. MCAP is market capitalization. GCAP is GDP per capita. GGRO is GDP growth rate. * is significant at 10%. ** is significant at 5%. *** is significant at 1%. t-statistics are in parentheses
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