Research On Monetary Policy,Financial Constraints,and Corporations Cash Holdings

Cash holdings is the most liquid asset in corporations.Firms hold adequate cash could meet needs for investment and repayment of credit so that guarantee the regular operation and seize the investment opportunity.However,cash holdings is also the asset with lowest return.It is a very important problem for the academic and the business that how to decide the optimal level cash reserves in order to meet needs of liquidity and value maximization at he same time.That question is highlighted during the current days when macro-economy changes intricately and require corporations have higher ability to exert liquidity management.The existing researches about the field of corporate cash holdings mainly focused on the background of the firm and industry level and neglected the influence of economic policies.In fact,macroeconomic policy could exert important emphasis on financing and investment of corporations.In addition,the transformation economic background in China result in the financing and investment of corporations reflect the emerging and transforming characters,and have close relationship with idiosyncratic firms.According to the financial constraint and taking into consideration of the financing and investment decisions,this dissertation researched the influence and consequence of the monetary policy on the firm-level cash hoarding.The empirical research suggested that monetary policy could bring significant influence on cash reserve,the dynamic adjusting speed for cash holding,and the economic consequence of cash holding.At the same time,the influence mechanism has relation with financial constraint condition.This dissertation found monetary policy was an important determinant factor for cash holdings.Compared with tight monetary policy,this dissertation found that listed firms have higher cash hoardings during loosen monetary policy.As far as financial constraint was concerned,financial constraint firms exposed more magnitude influence than financial unconstrained firms,had more cash holding.Loosing monetary policy could decrease the cash-cash flow sensitivity.But this effect mainly brought by financial unconstrained firms.As for financial constrained firms,the propensity to save cash flow was ascending for financial constrained firms,which indicated a higher cash-cash flow sensitivity.This dissertation found that there was an optimal level of cash holdings for firm.That was the ground for firms to adjust the cash reserve to the optimal level.During the loosing monetary policy period,the speed to adjust the cash reserve could become slowly.As far as financial constraint condition was concerned,this dissertation found that financial unconstrained firms could slow the speed while the financial constrained firms could not change the adjusting speed significantly.Monetary policy change could bring economic consequence to the cash holdings.Taking into consideration of the factor of financial constraint,the dissertation found that the loosing monetary policy could bring significant positive effect to value of cash holdings for financial unconstraint firms,while had not bring significant influence for financial constraint corporations.As for as the value of change of cash holding was concerned,this dissertation found that the value of change of cash holding was higher during the loosing monetary policy period.But this effect was mainly taken place for financial constraint firms.