Do Financing Constraints Moderate the Effect of Digital Transformation on Corporate Cash Holdings? Evidence from China

This study examines the impact of digital transformation on corporate cash holdings using panel data from 3,920 Chinese listed companies over the period from 2012 to 2021. By constructing a digital transformation index based on corporate annual reports, we explore how these transformations affect firm-level cash reserves, with a particular focus on the moderating role of financing constraints. The results indicate that digital transformation generally leads to a reduction in corporate cash holdings, although this effect is significantly weakened in the presence of strong financing constraints. Heterogeneity analysis further reveals that the negative impact of digital transformation on cash holdings is more pronounced in firms with lower levels of digital transformation and in non-loss-making companies. These findings provide valuable insights for corporate financial management and policymaking, highlighting the strategic importance of optimizing cash management practices under varying degrees of financial constraints in the context of digital transformation.