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Does a national reform of a logistics system matter in corporate cash management? Evidence from logistics service standardization in China

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  • Tan, Jianhua
  • Wang, Xiongyuan
  • Chan, Kam C.

Abstract

We examine the impact of a government-led logistics standardization reform on firm-level cash management in China. Facing high logistics costs, the Chinese government began a logistics service standardization (LSS) reform in 2014. Our findings suggest that firms in LSS cities hold less cash than those in non-LSS cities. Most important, these LSS firms have a higher market value of cash holdings than non-LSS firms. The findings are robust to alternative metrics of cash holding and different subsamples. Furthermore, we use a propensity score matching approach to mitigate potential endogeneity, run placebo tests and conduct Heckman two-stage analysis. Additional analyses suggest the following: (1) the impact of LSS reform on cash holdings lasts at least 2 years, (2) LSS firms experience better cash management efficiency than non-LSS firms, (3) the impact of LSS reform is more pronounced for state-owned firms (SOEs) than non-SOEs, and (4) LSS firms experience better corporate investment efficiency in terms of less overinvestment.

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  • Tan, Jianhua & Wang, Xiongyuan & Chan, Kam C., 2020. "Does a national reform of a logistics system matter in corporate cash management? Evidence from logistics service standardization in China," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:pacfin:v:63:y:2020:i:c:s0927538x19305451
    DOI: 10.1016/j.pacfin.2020.101399
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    Cited by:

    1. Yuan, Na & Gao, Yihong, 2022. "Does green credit policy impact corporate cash holdings?," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    2. Tan, Jianhua & Wang, Xiongyuan & Zhang, Peng, 2022. "Logistics service standardization and corporate innovation: Evidence from a natural experiment," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 549-565.
    3. Xia, Yanchun & Qiao, Zhilin & Xie, Guanghua, 2022. "Corporate resilience to the COVID-19 pandemic: The role of digital finance," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).

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