An Empirical Research Of Corporate Cash Holdings And Governance Mechanisms' Influence On The Cash Holdings

This article examines whether financial condition and corporate governance mechanisms play some roles in determining the cash holdings in Chinese publicly traded firms from 1999 to 2003. This article analyzes the corporate behavior of cash holdings, in order to find whether there are target cash holdings in these corporations and to find how financial condition, board structure and ownership concentration affect on the cash holdings.This article documents that there are target cash holdings in these corporations indirectly by regressing cash holdings and the variables that about financial condition, board structure and ownership concentration.These empirical research results of this article show that: firm size, Tobin Q, cash flow, fluctuating cash flow, cash holdings of preceding year, internal director, remuneration and top-one controlling ownership are positively related to cash holdings; on the other hand, capital expenditures, leverage, working capital (not including cash), board size and top-nine ownership (not including top-one controlling ownership) are negatively related to cash holdings. Obviously, corporate financial condition, board structure and ownership concentration are important determinants of cash holdings.Though this article can not find evidence for the relation hypotheses about dividend, CEO-chairman duality, insider ownership, government control and cash holdings, these findings also provide solid evidence for the relevance of the agency cost view of cash holdings.There are some features in this article: this article investigates the relation between top-nine ownership (not including top-one controlling ownership) and cash holdings, and documents that there are target cash holdings in Chinese publicly traded firms indirectly.