Financial Research Center (HCFR)Financial Research Center (HCFR)


The 9th Finance Workshop held

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Date: November 4th, Thurs.  17:15-18:45

Speaker: Mr Keiichi Hori  ( Kwansei Gakuin University)

Co-author: Mr Kohei Aono ( Ritsumeikan University)

Title: Measuring the Value of Corporate Cash Holdings against Predictable and Unpredictable Negative Shocks



This paper explores how cash mitigates predictable and unpredictable adverse cashflow shocks to firms using the financial data of Japanese firms. We find that (i) cash haspositive value before a predictable shock, whereas it has no value after a shock, (ii) after an unpredicted shock, the value of cash for the financially constrained firms is larger than that for the unconstrained firms, and (iii) the value of cash is similar between the two shocks for the unconstrained firms, whereas the value is larger when the unpredicted shock occurs than when the predicted shock occurs for the constrained firms.

Keywords: consumption tax hike, COVID-19, cash holdings, financial constraint, event study.
JEL Classification: G14,G32

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