Firms’ cash holdings play a crucial

Firms’ cash holdings play a crucial role, especially during financial crises. Most literature about cash holdings focuses on determinant factors of cash holdings, instead of the role of cash holdings in a financial crisis. Therefore, we aim to verify whether firms withhigher cash holdings can rapidly recover their operating performance after a financial crisis.The empirical results show that, if firms have higher cash holdings, their operating performance tends to recover more rapidly aftera financial crisis. The results hold after considering endogenous problems and various robustness checks. We also find that firms withhigh cash holdings can rapidly recover their operating performance after a financial crisis through capital expenditures and R&Dexpenditures. Furthermore, differences in financing constraints, corporate governance, and the degree of financial development canaffect the relationship between the cash holdings and the speed of recovery of the operating performance after a financial crisis.