Abstract
ABSTRACT This paper examines how the level of development of digital finance affects corporate cash holdings. By utilising the Digital Finance Inclusive Finance Index compiled by the Internet Finance Research Center of Peking University and data from China's listed companies, this paper finds that the development level of digital finance where a company is located is negatively correlated with corporate cash holdings. Furthermore, the negative effect of digital finance is more pronounced for non-state-owned enterprises and companies in the early stages of their life cycles. Additional tests show that digital finance can reduce a corporation's financial constraints and debt costs, and the coverage breadth and usage depth of digital finance have also significantly reduced the level of cash holdings for enterprises. Our findings provide insights for understanding the role of digital finance in firm behaviour in emerging economies.
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