This paper empirically explores the effect of monetary policy uncertainty on corporate cash holdings in China. We find robust evidence that monetary policy uncertainty is positively related to corporate cash holdings. The firms’ precautionary behavior in cash holdings is chiefly attributed to...

Using an NPV-based revealed-preference strategy, I find that idiosyncratic risk materially affects the discount rate that firms use in their capital budgeting decisions. I exploit quasi-exogenous within-region variation in project-specific idiosyncratic risk and find that, on average, firms...

Economic policy uncertainty has prominent effect on investment and output. We constructed a simple model revealing that policy uncertainty reduces the total value of investment via both the quantity adjustment channel and the price adjustment channel. Using unique transaction level land leasing...

This study investigates how uncertainty affects firms' target capital structure using a panel data set of U.S. public manufacturers between 2003 and 2018 and finds that high-uncertainty firms have 10.1 (8.1) percentage points lower mean book (market) targets than low-uncertainty firms. This...

We find that U.S. corporations increase their cash holdings in response to higher economic policy uncertainty. The increase in cash holdings is not attributed to a reduction in firm investments. This increase is more pronounced for financially constrained firms or those with larger exposure to...

We study the effects of uncertainty on corporate leverage adjustments with respect to investment spikes and find that overlevered and underlevered firms behave very differently in response to the combination of uncertainty and investment spikes. Overlevered firms facing high uncertainty converge...

Macroeconomic risks only partially capture the profitability premium, while adding a misvaluation factor based on investor sentiment helps explain a substantial amount of it. The profitability premium mainly exists in firms whose market valuations are inconsistent with their profitability and...

This study investigates whether economic policy uncertainty (EPU) magnifies peer effects in corporate investment in China. Through use of the peer-firm-average idiosyncratic stock return to capture exogenous variation in peer firms' investment activities, we show that peer effects are stronger...

Macroeconomic risks only partially capture the profitability premium, while adding a misvaluation factor based on investor sentiment helps explain a substantial amount of it. The profitability premium mainly exists in firms whose market valuations are inconsistent with their profitability and...

We examine how a firm's operational slack is associated with current income and future stock price crash risk. By doing so, we test the validity of a firm's alternative motivations for holding operational slack. We show that Supply Chain Slack, which is based on excess working capital, is...