Abstract
Do political beliefs matter for corporate cash-holding behavior? In this paper, we analyze whether the political preferences of managers affect their cash holdings. Using a composite political index to measure corporate political culture, we find that firms with Republican-leaning managers hold significantly less cash than firms managed by Democrats. We attribute the lower-level cash holdings of Republican firms to more conservative corporate policies, indicated by lower risk exposure, lower R&D expenditure, lower capital investment, and higher profitability. Our results survive various robustness tests, such as state-fixed effects and IV tests.