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

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  • Van, Huong Vu
  • Kim, Cuong Ly

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.

Suggested Citation

  • Van, Huong Vu & Kim, Cuong Ly, 2025. "Does increased digital transformation decrease corporate cash holdings? The moderating role of business environment quality," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000650
    DOI: 10.1016/j.frl.2025.106800
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    More about this item

    Keywords

    Digital transformation; Cash holdings; Business environment quality;
    All these keywords.

    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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