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Market Valuation of Cash Holdings: Role of Default Risk During COVID-19

Soumya Sankar Chakraborty et al.

Journal of Emerging Market Finance2025https://doi.org/10.1177/09726527251359027article
AJG 2ABDC B
Weight
0.50

Abstract

This study utilizes the exogenous shock of the COVID-19 pandemic to test whether the market values the precautionary motive of cash holding. Our analysis considers the period 2017–2020 to capture the market value of cash holdings owing to the anticipation of potential containment policies. Using a generalized difference-in-difference methodology, we show that firms with high cash holdings have a positive market valuation due to the reduction of firms’ default risk. Additionally, using a causal mediation analysis, our study establishes the causal pathway through which cash affects firms’ market value during the COVID-19 pandemic. JEL Classifications: G01, G32, G12, E44

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https://doi.org/https://doi.org/10.1177/09726527251359027

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@article{soumya2025,
  title        = {{Market Valuation of Cash Holdings: Role of Default Risk During COVID-19}},
  author       = {Soumya Sankar Chakraborty et al.},
  journal      = {Journal of Emerging Market Finance},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1177/09726527251359027},
}

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Market Valuation of Cash Holdings: Role of Default Risk During COVID-19

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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