FinTech and firm’s cash holdings: evidence from China

Abstract

Purpose This study aims to empirically explore the nexus between FinTech and a firm’s cash holdings. Design/methodology/approach A panel data regression analysis is conducted on a sample of A-listed firms registered on the Shenzhen and Shanghai Stock Exchanges from 2011 to 2019. To address simultaneity issues in the study, the authors use various endogeneity tests, including lag of independent variables, generalized method of moments and two-stage least squares estimation. Findings Results reveal that FinTech has a significantly negative effect on a firm’s cash holdings, suggesting that FinTech development improves cash management by alleviating agency costs and reducing financial constraints. The findings remain consistent across different FinTech measures and alternative cash holding proxies, demonstrating that FinTech serves as a corporate governance mechanism. Practical implications The findings suggest that FinTech disciplines corporate managers and alleviates agency problems regarding cash holdings. Originality/value This study suggests that FinTech determines a firm’s cash holdings.