Title: Policy uncertainty and cash holdings of construction firms in India: a dynamic panel regression approach

Authors: Rajni Kant Rajhans; Harish Singla

Addresses: NICMAR University, 25/1, N.I.A. Post Office, Balewadi, Pune – 411 045, Maharashtra, India ' NICMAR University, 25/1, N.I.A. Post Office, Balewadi, Pune – 411 045, Maharashtra, India

Abstract: The study aims to understand the dynamic impact of economic policy uncertainty on the cash holdings patterns of construction firms in India. A dynamic panel regression model was created with cash to total assets as the dependent variable and the policy uncertainty, natural log transformation of total assets as a proxy of size, natural log transformation of dividends, price to book value ratio in times as a proxy of growth opportunities, Indian promoter holding in percentage as a proxy of ownership, debt-equity ratio in times as a measure of leverage, return on total assets in percentage as a measure of profitability and change in sales as a measure of volatility as independent variables. Further, the data was split into two study periods (2003-2011 and 2012-2020) for a detailed investigation of the dynamic relationship between policy uncertainty and firm-level cash holding. The findings suggest that policy uncertainty and its lag, cash holding lag are the prominent drivers of cash holdings for Indian construction firms.

Keywords: cash holding; policy uncertainty; construction; assets; panel regression; leverage; profitability; return on assets; India.

DOI: 10.1504/IJEA.2023.135579

International Journal of Economics and Accounting, 2023 Vol.12 No.1, pp.77 - 97

Received: 14 Apr 2023
Accepted: 21 Aug 2023

Published online: 18 Dec 2023 *

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