Geopolitical risk and corporate cash holdings: Evidence from the U.S. hospitality industry

This study examines the association between geopolitical risk (GPR) and cash holdings in the U.S. hospitality industry, which is highly sensitive to external shocks. Analysis using the GPR index found that higher geopolitical risk was associated with increased cash holdings, supporting the precautionary motive hypothesis. Dynamic tests show that this response is reactive rather than anticipatory: cash balances rise following increases in geopolitical risk - most strongly for a two-year cumulative measure - display no anticipatory pre-trend, and persist thereafter, while a decomposition into perceived and realized components points in the same direction. The results are robust to an extensive set of macroeconomic controls, alternative risk aggregations and cash measures, and to improving covariate balance through coarsened exact matching, propensity-score matching, and entropy balancing; we interpret the estimates as robust associations rather than as formal causal effects. The study extends geopolitical-risk research beyond its predominant emerging-market focus to a developed-market hospitality setting and characterizes the timing through which liquidity policy responds to geopolitical risk.