Impacts of Innovation Policy on a Firm's Cash Holdings: Evidence from a Natural Experiment

Main Article Content

Guocui Pan
College of Economics and Management, Shandong Agricultural University, Tai’an 271018, China

DOI: https://doi.org/10.70267/icfmb.202619125150

Keywords

the demonstration bases for mass entrepreneurship and innovation, cash holdings, policy effect

Abstract

This study investigates the policy impact of China’s demonstration bases for mass entrepreneurship and innovation (DBEI) on a firm's cash holdings, a critical concern for firms navigating economic transformation. To mitigate potential selection bias, our analysis employs a PSM-DID (propensity score matching difference-in-differences) strategy, using data on Chinese A-share listed companies for the period 2010–2023. The findings reveal that the policy significantly lowers corporate cash holdings by easing financing constraints, spurring innovation investment, and accelerating digital transformation. This effect is more pronounced for non-state-owned enterprises, firms in eastern China, and those in non-manufacturing sectors. We recommend that policymakers adopt differentiated measures to encourage firms to leverage policy tools for reallocating cash toward innovation, thus enhancing capital efficiency and fostering long-term growth.

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Published
Jul 29, 2026
Conference Proceedings Volume
Vol. 19 (2026): Proceedings of 2026 International Conference on Financial Technology, Mathematical Statistics, and Business Analytics (ICFMB 2026) - Part 1
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How to Cite

Pan, Guocui. “Impacts of Innovation Policy on a Firm’s Cash Holdings: Evidence from a Natural Experiment”. Exploring Science Academic Conference Series, vol. 19, July 2026, pp. 125-50, https://doi.org/10.70267/icfmb.202619125150.