Does Credit Information Sharing Affect Corporate Cash Holdings?:Evidence from Chinese Listed Companies

Abstract

Based on the data of Chinese A-share listed companies over the period 2014–2018, the study empirically tests the impact of regional credit information sharing on the cash holding level of enterprises. We find a significant negative correlation between credit information sharing and corporate cash holdings, indicating that improving the level of credit information sharing can significantly reduce the level of corporate cash holdings. The higher the level of credit information sharing, the better the external financing environment for enterprises. Therefore, they will choose to hold less cash, and will invest more to higher profitable assets. Distinguishing the nature of equity, we further find that the negative relationship exists in both state-owned enterprises (SOEs) and non-state-owned enterprises(N-SOEs), but it is more significant in the former. Financing problems faced by N-SOEs are more prominent. Improving credit information sharing should have a more significant positive impact on financing for N-SOEs. Therefore, the decline in the optimal cash of N-SOEs should be more significant, but our study finds that SOEs have a greater decline. This shows that the impact of improving credit information sharing on the corporate cash holding level is not single. Although improving the level of credit information sharing is more conducive to improving the financing environment of N-SOEs, it also changes the motives of N-SOEs to hold cash, which greatly strengthens the motivation for having a first-mover advantage and improves the competitive advantage. Therefore, the negative impact of credit information sharing on the cash holding level of SOEs is even greater.