【Abstract】

Non-financial corporations invest heavily in financial assets nowadays, raising questions about the traditional boundaries of non-financial firms. We investigate how economic policy uncertainty affects firms’ holdings of non-currency financial assets and portfolios in China. We find that economic policy uncertainty has a negative effect on firms’ non-currency financial asset allocation, especially for less financially constrained firms. This result implies that other than precautionary saving, speculation is the underlying motive that drives firms to increase their non-currency financial asset holdings. Furthermore, economic policy uncertainty has a negative but weaker impact on financial asset holdings for firms in industries/regions with intensive competition.

【Keywords】

Economic policy uncertainty; Financial asset; Financial constraint; Speculation; Precautionary saving

【Authors】

Huang Jialin, School of Finance, Nanjing University of Finance and Economics. 

Luo Yu, Corresponding author, Research Fellow of IMI, School of Finance, Renmin University of China. 

Peng Yuchao, Research Fellow of IMI, School of Finance, Central University of Finance and Economics. 

Corresponding author.luoyu2011@ruc.edu.cn (L. Yu).