Corporate cash holdings and macroeconomic uncertainty: Does CEOs’ corporate distress experience matter?

This study investigates the role of CEOs’ corporate distress experience in shaping corporate cash holdings during periods of macroeconomic uncertainty. Analyzing a sample of 29,882 firm-year observations of exogenous CEO turnovers from 1992 through 2021, we find that firms led by CEOs with prior corporate distress experience hold more cash when macroeconomic uncertainty increases. This effect is more pronounced for CEOs with recent corporate distress experience, suggesting that the timing of prior distress plays an important role in shaping precautionary cash-holding behavior. Additional analysis shows that the effect varies across different types of distress experience, with prior exposure to adverse stock-return shocks, bankruptcy, and bond-rating shocks associated with stronger cash-holding responses to macroeconomic uncertainty. Our findings remain robust across additional analyses that address observable differences between treatment and control firms and alternative variable specifications.