Financing Constraints, Cash Holdings And Corporate Investments

In the perfect and complete market, external funds are complete substitute for internal funds in corporates, then there is no corporate constraints. However, in the real world, which is incomplete, the scarcity of financial resources and the problem of information asymmetry makes it difficult to allocate limited financial resources effectively, which makes a lot of firms fail to obtain sufficient funds to support the investment project. If this case happens, the firm is financially constrained. Actually, financial constraints is widespread existence in the real word, and significantly influences corporate cash holdings policy and investment behavior, considering of stable operation and long-term development. Therefore, it is very important to conduct research on the relations, which has a very significant theoretical and actual meaning.This thesis studies the corporate cash holdings policy and investment behavior under the influence of financial constraints in two aspects, based on the listed corporates data over the 2009 to 2013 years. One hand, this thesis builds a financial constraints model, then analyzes the impact of financial constraints on corporate cash holdings policy and investment behavior in theory. On the other hand, the thesis constructs a financial constraints index to measure the degree of financial constraints, then conducts an empirical test on the corporate cash holdings policy and investment behavior under the influence of financial constraints. This thesis establish models based on the study and the selection of control variables, then turns out the relations between financial constraints, cash holdings policy and investment behavior, based on the initial data.