From Information to Liquidity: How Industry-Level Transparency Shapes Corporate Cash Holdings

In this study, we exploit the staggered introduction of industry-specific information disclosure (IID) guidelines in China as a quasi-natural experiment to examine how an exogenous improvement in industry-level transparency and comparability affects corporate cash holdings. Using a sample of A-share firms listed on the Shenzhen and Shanghai Stock Exchanges from 2009 to 2019 and a difference-in-differences design, we find that IID guidelines lead to a significant increase in corporate cash holdings. Mechanism analyses suggest that this effect operates primarily through an agency channel: improved disclosure strengthens external monitoring and reduces agency-related costs, allowing firms to retain more internal funds. Cross-sectional analyses further show that the cash-increasing effect is more pronounced among private firms, non-loss firms, smaller firms, and firms with more concentrated ownership structures. Additional analyses indicate that the increase in cash holdings is accompanied by a higher market marginal value of cash. Overall, our findings provide novel evidence that industry-level disclosure regulations, via improving information transparency and comparability, have real consequences for firms' liquidity management and capital allocation in emerging markets.