Shifting paradigms: digital transformation’s role in corporate cash management

This study investigates how digital transformation (DT) affects corporate cash reserves. It uses DT variables constructed using web crawling and text mining, and unbalanced panel data from 3,498 samples (23,819 observations) of Chinese listed companies from 2011 to 2020 to empirically examine if DT can significantly reduce corporate cash reserves using the fixed-effects model, instrumental variables (IV) method, and difference-in-differences (DID) method. It also reveals that DT affects corporate cash reserves through three plausible channels: reducing debt levels, mitigating agency problems and reducing information asymmetry, and finds that DT has a more pronounced presence in non-state-owned enterprises (non-SOEs) and firms with small market shares. This research provides new insights for understanding the consequences of DT on the real economy.