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Effects of Product Market Competition on the Relationship between Internal Control and Cash Holdings

Year: 2025

Type: article

Abstract: Asymmetric information and economic uncertainty lead to more severe financial constraints for Chinese enterprises, prompting them to hold more cash in order to defend against future uncertainty and market competition. This paper uses Chinese-listed companies as a sample to analyze the relationship between internal control and cash holdings, and the results show that (1) the higher the quality of internal control, the higher the cash holdings. (2) The fierce product market competition promotes enterprises' precautionary motivation, thereby enhancing the positive impact of internal control on their cash holding levels. This paper shows how internal control affects the amount of cash held and how product market competition affects the relationship between internal control and cash holdings. This paper enriches cash-holding theoretical knowledge and helps enterprise managers make rational cash-holding decisions.

Source: Review of Economic Assessment

DOI: 10.58567/rea04020002

Author: Ning Li

Institutions: Yanshan College Shandong University of Finance and Economics, Shandong University of Finance and Economics

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

OpenAlex ID: W4416995379

FWCI:

Cites: 25

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