The Effect of Supply Chain Transparency on Corporate Cash Holdings: Evidence from China

This study examines the relationship between supply chain transparency and corporate cash holdings. While prior research has explored a range of determinants of corporate cash holdings, the role of supply chain transparency has received limited attention. Using a sample of Chinese A-share listed companies from 2013 to 2021, comprising 23,715 firm–year observations, we investigate whether and how supply chain transparency influences firms’ cash holding decisions. The results show a significant negative relationship between supply chain transparency and corporate cash holdings. Further analysis indicates that this effect operates mainly through two channels: the alleviation of financing constraints and the reduction of agency costs. We also find that the negative impact of supply chain transparency on cash holdings is more pronounced among firms with stronger market power, closer supplier–customer relationships, and better access to credit, as well as among firms in the manufacturing sector. Additional analyses suggest that the reduction in cash holdings associated with greater supply chain transparency is linked to improved firm value, lower stock price crash risk, and higher market liquidity. Overall, the findings highlight the importance of supply chain transparency in shaping corporate financial policies and provide new evidence on its role in optimizing corporate cash management. The study suggests that firms can benefit from enhancing voluntary disclosure of information related to their supply chain partners.