Purpose This study aims to investigate a new determinant of corporate cash holdings of Australian energy firms: economic policy uncertainty (EPU). Based on two motives for holding cash: precautionary and speculative motives, the authors argue that EPU increases financing constraints or induces firms to postpone investment projects, thereby increasing their cash holdings. The authors examine whether the Australian policy-related economic uncertainty affects cash holdings of Australian energy companies. Design/methodology/approach This research uses a data set of Australian energy firms from 2010 to 2020 and the Australian EPU index, which measures the uncertainty in economic policy, using news coverage of eight major Australian newspapers. To address the potential endogeneity bias and ensure the robustness of the results, three models are used: ordinary least squares, fixed-effects and dynamic generalized method of moments. Findings The authors find that the EPU index has a significant and positive effect on cash holdings, after controlling for firm-specific factors. While firm size and dividend payments have mixed and insignificant effects, other determinants are significant, such as growth opportunities, net working capital, cash flow, cash flow risk, leverage and capital expenditure. The authors also find that the positive effect of EPU on cash holdings is not the manifestation of EPU affecting corporate investments but rather explained by financing constraints. Practical implications The findings have implications for policymakers and regulators in Australia as the uncertainty of their economic policies plays an important role when Australian energy companies determine their cash holding level to manage liquidity risks. Originality/value This study is the first to document EPU index as the new determinant of corporate cash holdings of Australian energy companies. Firms in this sector have a great need of funding and liquidity for their operations and capital-intensive projects. High EPU index induces them to hold more cash to avoid liquidity shocks.
Purpose This study aims to investigate the relationships between loan growth, loan losses and net income after the 2008 global financial crisis. This study further conducts a comparative analysis by considering the period of COVID-19. Design/methodology/approach This study uses panel data models such as one-step system GMM, random effects, fixed effects and OLS, with a data set of 131 Chinese commercial banks from 2009 to 2020. Findings The study finds no significant relationship between loan growth and future loan losses. However, after adjusting loan loss by net interest income (NII-adjusted loan loss), the study reveals that loan growth in the subsequent year decreases if NII-adjusted loan loss increases. The study also demonstrates the positive effect of loan growth on net income as newly expanded loans are funded at similar costs but offered at a lower rate compared with existing loans. During COVID-19, loan growth and net income were higher than in previous years. Originality/value The findings suggest that Chinese banks can increase lending to support the economy without sacrificing loan quality, emphasizing the importance of maintaining and enhancing credit policies and practices. Chinese banks should also continue to refine their pricing strategies for loans and deposits. The findings also imply that China's policy responses to the impact of COVID-19 could serve as lessons for future policy decisions.
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