Unintentional Man‐Made Disasters and Corporate Cash Holdings

ABSTRACT Using hand‐collected data on major safety accidents in China, this paper finds that unintentional man‐made disasters lead managers to increase corporate cash holdings, particularly when firms are geographically closer to the disaster. Moreover, private firms, firms facing greater financing constraints or those paying less attention to safety protocols induce more significant shifts in cash policy. Channel tests show that the impact of these disasters on corporate cash holdings arises mainly from managerial perception of uncertainty rather than direct business risks. Further analysis reveals that disasters in CEOs' hometowns also influence managerial sentiment.