Political Uncertainty and Cash Holdings

Abstract

The present study investigates the impact of political uncertainty on corporate cash holdings. In this research, political uncertainty is considered the independent variable, corporate cash holdings serve as the dependent variable, and firm size, financial leverage, firm growth, working capital, and Return On Assets (ROA) are included as control variables. The sample consists of 169 firms listed on the Tehran Stock Exchange over the period 2014–2023 (1393–1402 in the Iranian calendar). The study employs a descriptive correlational research design, and the hypotheses are tested using the Ordinary Least Squares (OLS) method with EViews 12 software. To achieve the main research objective, a single hypothesis was formulated and empirically tested. The results indicate that political uncertainty has a significant negative effect on corporate cash holdings. Given the negative impact of political uncertainty on corporate cash reserves, it can be concluded that during periods of heightened political uncertainty, firms should develop appropriate strategies to avoid underinvestment and enhance performance and investment levels. Additionally, it is recommended that private sector investors and financial analysts consider corporate liquidity as a key metric for assessing and predicting investment behavior during politically uncertain periods.