The Characteristics Of Family Control Right And Abnormal Cash Holdings Of Private Listed Companies

Cash holding policy is an important policy of modern companies and an overall reflection of the companies'financial strategy and operational strategy. It has a tight relation with the corporate governance. Neither too much nor too less cash holdings is good for the companies, and these two both are the reflections that the corporate governance mechanism has some deficiency. And the most important factor of the governance mechanism in private listed companies is the characteristics of family control right. The aim of this paper is to provide some theoretical basis and empirical evidence for how to improve the governance mechanism and reduce the abnormal cash holdings of Chinese private listed companies by means of the research on the relationship between the characteristics of family control right and the abnormal cash holdings of Chinese private listed companies.This paper uses a sample of Chinese private listed companies from 2006 to 2008 in stock markets of Shanghai and Shenzhen, sets the abnormal cash holdings as the dependent variable, the factors of the family control right's characteristics as the independent variables. By thinking about the reasons of proportion, road of acquired, way of achieved, management participation degree and other characteristics of family control right, we make an exploring research on the relationship between the characteristics family control right and the abnormal cash holdings of Chinese private listed companies. As there are only four research papers about abnormal cash holdings in China at the present time, while the area of research on the relationship between the characteristics of family control right and the abnormal cash holdings of private listed companies is still blank, so this paper opens up a new research direction and it is just the innovation of our research.The results reveal that: (1) the proportion of family control right has a significant negative impact on abnormal cash holdings in private listed companies. (2) The private listed companies of IPO pay more attention to the problem of cash utilization efficiency and have a more reasonable abnormal cash holdings level than those private listed companies which family control right acquired road is indirect. (3) The abnormal cash holdings level of private listed companies using direct form to achieve family control right is superior to those private listed companies using the form of pyramid structure; The real reason that control family invades private listed companies'interest is different interests between control family and listed companies, the separation of control and cash flow right is just the skin-deep reason. (4) Whether the management is designated by control family or not has much less influence on abnormal cash holdings. In other words, the "descent" of chairman or president is not important in private listed companies, more important is their personal qualities and professional competence.