Abstract The adoption of digital technologies has emerged as a transformative force in shaping corporate financial strategies, particularly in optimizing cash reserve management. This study examines the impact of digital technology adoption on corporate cash holdings, with a particular emphasis on the moderating role of financing constraints. Leveraging a novel digitalization index constructed from corporate annual reports using advanced natural language processing techniques and drawing on data from Chinese publicly listed firms between 2012 and 2021, the findings demonstrate that digital technology adoption significantly reduces cash holdings, with this effect being more pronounced in non-high-tech firms compared to their high-tech counterparts. Financing constraints are shown to moderate this relationship, underscoring their critical role in shaping corporate liquidity strategies. These results are consistent with agency theory, which advocates minimizing the costs of excess cash, and financial distress theory, which emphasizes the protective role of liquidity buffers in mitigating risks. Beyond its theoretical contributions, the research offers practical implications: managers can recalibrate liquidity strategies in line with digital transformation, while policymakers can design interventions that ease financing constraints to foster sustainable economic growth.
Tingqian Pu (2025) studied this question.