To hoard or not to hoard? Political uncertainty and corporate cash holdings in emerging Asian economies

This study aims to examine the impact of political uncertainty on corporate cash holdings across eight Asian emerging economies from 1990 to 2023, using data on national elections and corporate financial data. We focus on two distinct electoral systems: a presidential or legislative electoral system (in Indonesia, South Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand) and an assembly-elected presidential system (in the People’s Republic of China), to explore how these systems influence corporate cash holdings. Using fixed effects regressions, the study estimates the sensitivity of cash holdings to cash flows during election periods, showing that cash holdings vary not only by electoral system but also by firm size. The results show that firms in presidential or legislative systems exhibit higher cash flow sensitivity during elections, while firms in the assembly-elected system (China) show negative sensitivity. In addition, this study presents an in-depth examination of close election results and coup d’état events, studying their impacts on corporate cash-holding strategies. These findings show how elections shape corporate financial strategies, contributing to the literature on political uncertainty and its differential impacts on corporate behaviour across different political contexts.