An Empirical Research On The Marginal Value Of Cash Holdings For The Listed Firms In China

For the past decade,domestic and foreign financial scholars have paid more attention to the enterprise cash holdings behavior;a great number of academic achievements on the listed companies' behavior of cash holdings have emerged.For the research of the revenues and costs of holding cash,more scholars at home and abroad study on the determinants of corporate cash holding,but studies on economic consequences of cash holdings from the perspective of shareholders are relatively rare. How much do shareholders valuate the extra yuan of corporate(that is,the Marginal Value of Cash),which factors will affect the marginal value of cash,both of which are parts of the economic consequences of corporate cash holdings.These Researches on the issue in China has just begun.In this paper,we take the pooled data of Chinese listed companies during 2002-2006 as samples,and use multiple linear regression OLS method to study how the corporate financial policy(the level of cash holding, leverage,financing constraints,growth) and the level of corporate governance to influence and determine the marginal value of cash.This paper includes five parts.Part 1 introduces a research background,contents and significance,the framework of this paper,and finally pointed out the main innovation.Part 2 includes literature review concerning the cash holdings strategy, and discussed the research Status at home and abroad.Part 3 is about the research design,which describes details of the data sources and sample selection,the definition and calculation of research variables,theoretical analysis and research supposition, research procedures.The content of part 4 is description and analysis of the empirical results.Part 5 is the conclusion of the study and enlightenment in this paper,and puts forward the limitations of this study,makes recommendations on the improvement direction of follow-up studies.In this paper,we found that:(1)The marginal value of cash is decreasing in the level of the firm's cash position;(2)An extra yuan of cash holdings is less valuable for shareholders in highly levered firms than in firms with low leverage;(3)For the mean firm-year in the sample,the marginal value of cash is just￥0.705;(4)An extra yuan of cash holdings is more valuable for shareholders in financially constrained firms;(5)The marginal value of cash of firms with high growth will not be significantly higher than firms' with low growth;(6)The quality of corporate governance did not significantly affect the marginal value of cash.Thus,we argue that the corporate tax effects,free cash flow agency problem,the agency conflict between shareholders and creditors and information asymmetry will indeed lower the marginal value of cash holdings for the listed companies in China.In addition,we do not find the evidence of corporate governance quality having significantly impact on the marginal value of cash,and also do not find the evidence of"corporate governance premium",which may be due to investors' irrational investment behavior and the heavy speculation in Chinese stock market.The impact of cash holdings on firm value,there are two opposite points of view, which are positive valuation theory based on the information symmetry and negative valuation theory based on the agent theory.Agency theory argues that:agency costs caused by the more serious agency problems will lower value of cash holdings,which means discount of the value of cash holdings will occur.And the empirical conclusions of this paper proves the basic viewpoint of agency theory,providing the evidence of explaining cash holdings action of listed companies in China with agency theory.However,this paper also found that information asymmetry is also an important factor which impacts the marginal value of cash holdings of listed companies.At the same time,some finds of the marginal value of cash based on the shareholders view will not only guide listed companies to hold and use cash more reasonably,but also lead investors to invest rationally;providing some inspiration for improving the operating efficiency of Chinese listed companies,corporate governance and efficiency in the securities market.