Uncertainty and the value of cash holdings

•This paper examines how firm-level uncertainty affects the value of cash holdings.•A firm with higher firm-level uncertainty has a higher value of cash holdings.•Uncertainty affects the value of cash through financial constraints and agency conflicts.•The effect is also attributed to the increased value of the option of waiting and seeing.

We find that a firm facing higher uncertainty has a higher value of cash. This effect is attributed to the increased value of the option to wait and see as well as the aggravated financial constraints and mitigated agency conflicts.