Corporate Cash and Political Uncertainty

86 Pages Posted: 3 Jan 2018 Last revised: 4 Oct 2022

See all articles by Candace Jens

Candace Jens

Syracuse University - Whitman School of Management

T. Beau Page

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Date Written: October 1, 2022

Abstract

How does political uncertainty affect firms' saving? Using a dynamic difference-in-difference framework and gubernatorial elections as a source of uncertainty, we show that firms save an extra quarter's worth of cash before elections. Changes to saving dwarf changes to investment around elections and are likely driven by higher cost of capital. No one source of cash explains firms' aggregate pre-election saving. Firms that can cheaply raise funds by decreasing payout do so, or adjust leverage ratios. Firms that rely on external equity markets to raise cash adjust the timing and magnitude of issuances to avoid higher financing costs around elections.

Keywords: corporate saving, cash, political uncertainty, gubernatorial elections, economic policy uncertainty

JEL Classification: D72, G31, E21

Suggested Citation

Jens, Candace and Page, Beau, Corporate Cash and Political Uncertainty (October 1, 2022). Available at SSRN: https://ssrn.com/abstract=3094415 or http://dx.doi.org/10.2139/ssrn.3094415

Candace Jens (Contact Author)

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Beau Page

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

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