Empirical Study Of High Cash Holdings And Influence Factors Of Listed Companies In China

With the current rapid development of China's securities market, listed companies have become the main force of China's market economy, and they are enterprise organization full of vigor and development capacity. Although listed companies have huge funding and expansion capabilities, many of them tend to hold large amount of cash in hand. In China, generally, the percentage of cash holdings of listed companies is higher than those of European and other developed countries. A large number of empirical studies abroad have discussed the reasons of this phenomenon and the impact on the value of companies, the static tradeoff theory, the free cash flow theory and the pecking order theory, etc., have been carried out. Whereas in China, currently, even though some scholars started to focusing on the high portions of cash holdings of listed companies, there is no unified interpretation of this phenomenon in the theoretical and also empirical research area. This article uses the agency theory and the trade-off theory as the theoretical foundation, analyzing the behavior of the high cash holdings of listed companies, and discusses the main factors affecting the high cash holding of listed companies and the impact on the company performance.This paper reviews the literature of the listed companies'high cash holdings motivation which has been researched by the domestic and foreign scholars. Based on the theory of high cash holdings, combined with the China's economic system and using the 2007-2009 Shanghai and Shenzhen listed company data as the research sample, I defined the high cash holding company and divided the sample into two groups:high and low levels, respectively. Based on existing research papers, using the contrast method, I discussed the company's financial characteristics and management features, find out the factors which could affect the high holding of listed companies. The factors are as below:company size, financial leverage, cash flow, cash flow volatility, short-term debt structure, the bank loads, cash substitutes, the proportion of stated-owned shares and the degree of protection of shareholders.ect. Finally I use the factors as the research variables to construct a reasonable model, using the empirical research method to analyze the correlation of these factors to the high cash holding. Based on the analysis above, and then discuss the correlation between high cash holdings and company performance.