The Empirical Study On Cash Holdings And The Corporate Characteristics

Cash holdings is important to cash management, not only relating to the daily operation of business, other financial decisions but also relating to the economics management of the company .Western scholars have started the topic from various aspects, including motive theory, static tradeoff theory, financing hierarchy theory,information asymmetry theory and agency theory. There has been a considerable amount of the empirical studys since the 1990s according to these theory .Amony these studys, an increasing number of factors have been suggested to influence cash holdings. However, limited study analyzes the issue from internal characteristics of the company, such as profit ratios and operating turnover ratios. This paper studys the influencing factors of cash holdings from internal characteristics of the company.This Paper designs some assumptions on the theory of western scholar and the economic regular and regulations of China, and regards the 356 companies listed on Shanghai Security Exchange as samples during the year 2007-2008. We set cash holdings as dependent variable, and set return quality, asset liquidity, asset tangibility, inventory turnover, the receivable payment velocity, corporate scale, the accounts payable percentage as independent variable. First of all, This paper uses descriptive statistics to study the current situation of both cash holdings of the companies and independent variable, the finding shows that the companies have relatively high cash holdings. Secondly, this paper utilizes the multi-linear regression model and research .Thirdly, the paper makes a conclusion that return quality, asset liquidity , asset tangibility , inventory turnover , the receivable turnover, corporate scale have a significant negative correlation with the corporation cash holdings, the accounts payable percentage has a significant positive correlation with the corporation cash holdings.Lastly, the paper makes useful suggestions on the cash management according to the result of the empirical study from the aspects of return quality, asset liquidity , asset tangibility, inventory, the receivable payment, corporate scale and the accounts payable.