Social Status and Corporate Cash Holdings: Evidence from China

This study investigates whether corporate social status shapes cash-holding decisions and through which channels this effect occurs. Using 11,266 firm-year observations for Chinese A-share listed companies from 2007 to 2024, corporate social status is measured as a market-recognition signal based on analyst attention, and its relationship with cash holdings is examined under year and industry fixed effects. The results show that higher social status is significantly associated with lower corporate cash holdings. This finding remains robust after addressing potential sample-selection bias with a Heckman two-stage model, redefining both cash holdings and social status, excluding years affected by major financial events, and applying alternative model specifications. Further analysis reveals important heterogeneity: the negative effect is more pronounced among non-state-owned enterprises and among firms without close bank-firm ties, suggesting that social status is especially valuable when formal institutional support or relationship-based financing is weaker. Mechanism tests show that social status reduces cash holdings partly by increasing capital expenditure, indicating that higher-status firms are more able, or more willing, to convert liquidity reserves into investment. In addition, financial constraints strengthen the relationship between social status and cash holdings, implying that status-based signals are particularly consequential when firms face tighter access to external finance. This study contributes to research on corporate liquidity management by shifting attention from purely economic determinants to the social attributes of firms. It also provides evidence that market-recognized status can function as an informal governance and resource-allocation mechanism in emerging capital markets. The findings offer practical implications for managers, financial institutions, and policymakers: cash-holding policies should be evaluated not only through balance-sheet indicators, but also through the firm's social position, financing environment, ownership structure, and investment opportunities.