Analysis of the Impact of Supply Chain Concentration on Cash Holdings

Against the backdrop of globalization, supply chain concentration has emerged as a critical factor influencing corporate financial strategies. This study delves into how supply chain concentration, encompassing supplier and customer concentration, affects corporate cash holdings and explores the moderating role of corporate governance. Using data from Chinese A-share listed companies from 2012 to 2023, it employs a fixed-effects ordinary least squares regression model. Interaction terms of board size, the proportion of independent directors, and supply chain concentration are constructed for heterogeneity analysis. The Herfindahl-Hirschman Index is utilized as an instrumental variable to address endogeneity, accompanied by robustness tests. The findings reveal a significant positive correlation between supply chain concentration and cash holdings. Supplier concentration (with a coefficient of 0.0162) and customer concentration (0.0152) both prompt firms to hold higher cash reserves. Corporate governance moderates this relationship: larger boards amplify the effect, while independent directors have no significant influence. This study identifies supply chain concentration as a key liquidity driver, facilitating the integration of supply chain management and corporate finance theories. Practically, it advises enterprises to balance supply chain relationships and governance structures to optimize cash reserves and enhance financial resilience in dynamic markets.