Mandatory Information Disclosure Regulation and Corporate Cash Holdings: Evidence From a Quasi‐Natural Experiment

ABSTRACT This paper examines the impact of mandatory information disclosure regulation on corporate cash holding decisions, a fundamental component of working capital management. Using industry‐specific information disclosure guidelines as a quasi‐natural experiment that introduces shocks to disclosure practices across different sectors, we find that the implementation of these regulations leads to a significant reduction in corporate cash holdings. We identify two mechanisms underlying this effect. Specifically, the implementation of the information disclosure regulation lowers agency costs and reduces the operational risks faced by firms, leading to lower cash holdings. Heterogeneity analysis shows that the…

• NS
  Natural Science Foundation of Chongqing

  Award: CSTB2024NSCQ‐MSX0130