Does increased digital transformation decrease corporate cash holdings? The moderating role of business environment quality

Huong Vu Van and Cuong Ly Kim

Finance Research Letters, 2025, vol. 75, issue C

Abstract: Despite the growing impact of digital transformation on firms' financial performance, its effect on corporate cash holdings remains underexplored. This study addresses this research gap by investigating the relationship between digital transformation and corporate cash holdings in Vietnam. The findings, based on microeconometric analysis of Vietnamese-listed firms, indicate that digital transformation reduces corporate cash holdings. However, this effect diminishes when considering the moderating role of business environment quality. These results highlight that digital transformation policies alone may be insufficient to address excessive corporate cash holdings without concurrent improvements in the quality of the business environment.

Keywords: Digital transformation; Cash holdings; Business environment quality (search for similar items in EconPapers)
JEL-codes: G34 G39 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000650

DOI: 10.1016/j.frl.2025.106800

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