Does the Antimonopoly Law improve companies' cash-holding management efficiency? Empirical evidence from Chinese listed companies

Using listed firms' data between 2004 and 2011, we find that China's Antimonopoly Law provokes a significant increase in firms' cash-holding management efficiency; that is, cash holdings are more aligned with firms' investment opportunities. We show that the increase in cash-holding management efficiency is more pronounced in less competitive industries and these increases are mainly driven by unrestricted industries. Financial constraint is an important channel through which competitive pressure would impact the cash-holding management efficiency. Our results are robust to different sample period selections and proxies for cash holding and investment opportunity.