Does internal information quality impact corporate cash holdings? Evidence from China

This paper examines the impact of internal information quality (IIQ) on corporate cash holdings in China. Employing two widely used IIQ measures (i.e., the earnings announcement speed and the absence of financial restatements), we show a significant and negative association between IIQ and corporate cash holdings. This negative relation is concentrated among complex firms (i.e., firms with more business segments), non-state-owned firms, and firms with poor corporate governance. Our findings are valid after we consider endogeneity issues. This paper suggests that the quality of the internal information environment plays an important role in influencing firms’ cash holding decisions.