Impact of Sudden Public Incidents, Corporate Cash Holdings and Investment Expenditure

Corporate investment is highly sensitive to changes in supply and demand as well as economic cycles. The credit crisis and the uncertainties in the external environment can also affect a company's investment behavior. The cash holdings of an enterprise can help withstand operational risks during sudden crises and play a certain role in maintaining investment. This paper takes A-share listed companies from 2018 to 2021 as samples, and uses the DID (Difference-in-Differences) model to test the buffering effect of the cash holding level of enterprises before the COVID-19 pandemic on their investment behavior during the pandemic, and also conducts a heterogeneity test. The results show that after the pandemic, the investment expenditure of enterprises has dropped significantly, and the high cash holding policy of enterprises before the pandemic can have a certain buffering effect on their investment expenditure. Further research reveals that for enterprises with greater financing constraints, the cash holding level has a stronger buffering effect on the decline in investment expenditure during the pandemic; while for enterprises with a higher degree of operation in overseas markets, the buffering effect of the cash holding level on investment expenditure is weaker.