Geopolitical risk and corporate cash holdings in the shipping industry

You are here: Homepage > Search

Geopolitical risk and corporate cash holdings in the shipping industry

Kotcharin, Suntichai / Maneenop, Sakkakom

Highlights • Shipping companies significantly increase their cash reserves in response to higher geopolitical risk (GPR). • The impact of GPR to the shipping industry is significant relative to other sentiment indices. • The impacts of GPR depend on firm characteristics and types of shipping firms. • Listed shipping firms in Asian countries are more vulnerable to a change in GPR.

Abstract We examine the cash holding decisions of global shipping firms in response to a change in geopolitical risk (GPR). Our results show that shipping companies significantly increase their cash reserves after GPR rises. The positive impact of GPR is more pronounced for firms with greater financial constraints. A further analysis shows that GPR positively and significantly affects dry bulk and container firms, but has an insignificant impact on tanker and logistics firms. We also find that GPR positively affects the corporate cash decisions of Asian listed shipping companies, but not those of other globally listed shipping companies. This study calls for policymakers to implement appropriate monetary and fiscal policies.