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Financial geographic density and corporate financial asset holdings: Evidence from China

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  • Wang, Ting
  • Xu, Jiani
  • Yang, Liuyong

Abstract

Using data from publicly listed A-share nonfinancial firms in China from 2011 to 2021, we define financial geographic density as the number of financial institutions within a certain radius around the firm, and investigate the impact of financial geographic density on corporate financial asset holdings. Our findings reveal that financial geographic density promotes corporate financial asset holdings by alleviating information asymmetry. The positive impact of financial geographic density on firms' financial asset investments is more pronounced for firms located in regions with a larger number of banking depository financial institutions, as well as those facing greater market competition. Meanwhile, we document that Fintech has little impact on the relationship between financial geographic density and corporate financial asset holdings. Furthermore, the rise of financial geographic density facilitates corporate innovation, thus supporting the precautionary motives of firms to hold financial assets.

Suggested Citation

  • Wang, Ting & Xu, Jiani & Yang, Liuyong, 2024. "Financial geographic density and corporate financial asset holdings: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:pacfin:v:86:y:2024:i:c:s0927538x24001720
    DOI: 10.1016/j.pacfin.2024.102421
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    More about this item

    Keywords

    Financial geographic density; Corporate financial asset holdings; Fintech; Information asymmetry;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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