Is it good to hold more cash before the pandemic? A case of Taiwanese firms

Shih-Wei Wu; Manh-Thao Nguyen; Ngoc Thuy Mai; Jung-Fa Tsai

doi:10.1016/j.heliyon.2023.e16050

Is it good to hold more cash before the pandemic? A case of Taiwanese firms

Heliyon. 2023 Jun;9(6):e16050. doi: 10.1016/j.heliyon.2023.e16050. Epub 2023 May 24.

Authors

Shih-Wei Wu¹, Manh-Thao Nguyen¹, Ngoc Thuy Mai¹, Jung-Fa Tsai¹

Affiliation

¹ Department of Business Management, National Taipei University of Technology, Taipei, 106344, Taiwan.

Abstract

The Covid-19 pandemic poses a great damage to firm performance worldwide. It raises the empirical question that if any factor can help firm perform better during the pandemic. In this study, we hypothesize that firms holding more cash before the pandemic can perform better during the pandemic year in 2020. We collect all listed firms from Taiwan Stock Exchange and test this hypothesis. Adopting a panel-data regression models with fixed effects, we find supportive evidence that pre-saved cash is valuable and can help firms perform better during the pandemic. Cash-rich firms will have a higher return on equity and return on assets. The economic significance is also non-trivial. Our study thus contributes to our understanding of how the pandemic can affect firm business and which lesson we can learn from this pandemic.

Keywords: Cash holdings; Covid-19; Pandemic; Performance; Return on asset; Return on equity.