The Varying Impact of Cryptocurrency Investments on a Company’s Liquidity in Korean Companies

Abstract

This study investigates whether cryptocurrency investments have a distinct impact on corporate liquidity depending on when they are held and the stage of a firm’s life cycle at the time of holding, using a sample of Korean companies. The empirical findings first show that cryptocurrency investments affect a company’s liquidity differently depending on when they are held. The findings demonstrate that, three years prior, labeled as t-1, t-2, and t-3, the two-year-old cryptocurrency investments appear to have greatly increased the company’s financial liquidity. Second, this study discovers that cryptocurrency investments have a different effect on a company’s liquidity based on the four stages of its life cycle, which comprise Introduction, Growth, Maturity, and Decline, at the time of holding. According to the findings, cryptocurrency investments at the Mature stage appear to contribute significantly and positively to the company’s financial liquidity. When the coefficients of interaction terms between each year and each life cycle are examined, it is observed that the holding of cryptocurrencies at the Mature stage in year t-2 has the most favorable influence on the company’s financial liquidity in year t. Although the findings do not conclude that the company’s cryptocurrencies held in year t-2 and at the Mature life cycle stage are the only ones that improve financial liquidity, they do suggest that a corporation may profit if it makes astute cryptocurrency investments at the appropriate time to suit its specific set of circumstances.