Free Trade Zone and Corporate Cash Holding: Empirical Evidences from Chinese Listed Companies

Abstract

Abstract: Taking Chinese listed companies from 2007 to 2019 as samples, this paper uses PSM-DID method to empirically test the impact of the establishment of FTZ on corporate cash holdings. It is found that the establishment of FTZ can significantly reduce the present level of corporate cash holding. The influence of the FTZ establishment on corporate cash holding is more significant in the enterprises supported by the Belt and Road Initiative. The establishment of FTZ is more able to reduce the cash holdings of the enterprises in the manufacturing industry. The management shareholding can play more roles in reducing corporate cash holding from the establishment of FTZ. The results of the mechanism study show that the reason why FTZ establishment can reduce corporate cash holding lies in the fact that FTZ can reduce the transaction costs and relieve the financing constraints of the enterprises. Further analysis of the economic consequences reveals that the FTZ establishment can improve corporate value through reducing corporate cash holdings.

Key words: free trade pilot zone, corporate cash holdings, institutional dividend

CLC Number:

F275.1

ZHANG Rui, ZHANG Yue. Free Trade Zone and Corporate Cash Holding: Empirical Evidences from Chinese Listed Companies[J]. Contemporary Finance & Economics, 2021, 0(10): 127-137.

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