Corporate Assessments of Cash Sufficiency and Implications for Business Strategies

We analyze survey data from Japanese firms to explore their self-reported assessments of cash sufficiency at the onset of COVID-19 and their intended cash use thereafter. A striking 71.4% of firms reported their cash holdings as more than sufficient to address the cash flow shortfalls caused by the pandemic. This sufficiency was not necessarily a result of ample cash holdings; rather, low leverage and shorter expectations for revenue recovery were key factors. Firms confident in their cash sufficiency intended to allocate their cash towards pursuing active corporate behavior. In contrast, those with high actual cash holdings exhibited managerial conservatism.