We examine the impact on firm cash holdings of uncertainty of uncertainty, measured as the ex post volatility of economic policy uncertainty. Using the news-based index developed by Baker et al. (2016) for twenty-two countries, we find that, when there is greater volatility of economic uncertainty, firms hold more cash. Our results are robust to controlling for a host of firm-level and country-level factors. Consistent with Baker et al. (2016), we consider that less economic policy uncertainty is associated with more investment; and so the real-option value of cash is sensitive to the possibility of a future desirability of investment. Therefore, when there is greater expected volatility of uncertainty, measured under rational expectations as the recent ex post volatility of uncertainty, firms will hold more cash. We also find that the volatility of economic policy uncertainty is much more economically significant in determining firm cash holdings than economic policy uncertainty itself. Therefore, our paper not only adds to the literature on uncertainty and cash holdings, but also, importantly, to the limited literature in finance on the impact of uncertainty of uncertainty.

Few studies investigate whether ESG mitigates the harmful effects of changes in firms’ external environments. We evidence that ESG mitigated the impact of COVID-19 work-from-home and workplace prescriptions amongst several other pandemic-related government regulatory interventions, even when controlling for firm size. In a novel approach, we apply scrutiny of firms to restrict our cross-national sample to only firms with no cross-border trade, that is, explicitly domestically focused operational processes irrespective of the endpoint of corporate sales, enhancing methodological robustness. Consequently, we isolate an ESG effect. Results indicate the existence of a premium during the onset of each analysed national pandemic experience, particularly pronounced for those corporations that had achieved more substantiative ESG-based preparation and development before the onset of the COVID-19 pandemic.