A Study On Financial Constraints And Cash Holdings Of Chinese Listed Companies

In inefficient and incomplete markets, the cash holding policies are affected by many factors. Based on the review of literature concerning the theory of the financial constraints and cash holding, the paper puts forwards the studying assumption and conducts an empirical analysis of the relationship between cash holdings and financial constraints to reveal the connotative meaning of cash holding policies. It is supposed to provide useful reference related to decision-making behavior for interest-related parties such as investors, manager of cooperates and government monitoring department.This paper selects the list companies of Shanghai and Shenzhen stock markets from the year 2003 to 2006 as samples by eliminating ST, *ST, PT, newly-listed, delisted, as well as incomplete disclosure companies, and finally get 2236 samples. According to our financial constraints criteria, these samples are classified, together with reasonably selected independent variables, dependent variables and control variables to build modeling. Then Excel and SPSS are used to test the correlation among cash holdings, financial constraints and cash flow fluctuations with the help of T-test, pearson-correlation analysis, descriptive analysis of variances and multiple variable regressions.The empirical study reaches the following conclusions.Cash holding policies are strongly affected by financial constraints. The relationship between cash holdings and cash flowing fluctuations in financial companies is a remarkably positive, while it's not significant in unconstraint companies.There is a remarkable positive relationship between cash holding and cash flowing in either financial constraints companies or unconstraint ones.