Empirical Study On High Cash Holdings' Motives And Economic Consequences Of Manufacturing Listed Companies

Cash holdings are important finance management for every corporation, which reflects the financial strategy of the corporation, like the corporation's capital structure, investment and financial decision, and cash dividend policies. Moreover, it is also closely related to a corporation management. Kim(1999) research shows that American corporate cash holdings is 8.1% on average, Ozkan (2004) studies show that UK corporate cash holdings is 9.90% on average, and this paper statistical analysis results show that cash holdings of manufacturing is 13.61% in China. The study shows that many listed companies Cash holdings level is high.This consistent with conclusions of other scholars. There are various explanations for high cash holdings, including agency theor y and Trade-off Theory. The former point of view believes higher cash holdings are a means for management to procure personal benefits under the situation of the ownership and administrative power separation in the modern enterprise system, which does harm to the enterprise value. But the later point of view believes the higher cash holdings are to avoid the higher cost of financing from external sources and maximize the enterprise value, after comparing the cost and benefit of higher cash holdings.Through the empirical research, this paper try to explain the behavior of our manufacturing companies large cash holdings and the relationship between Large cash holdings and Operating performance.The domestic existing research mainly concentrated on the influence factors of cash holdings. The study on high cash holdings are relatively few, Combined with a particular industry large cash hold behavioral research appears more less. This paper adopts normative theory research and empirical research method of combining study, this thesis analyzes the higher cash holdings in China's manufacturing industry and the economic results. Through the study, we can understand correctly the cash holdings situation of China's listed manufacturing cooperates, and make proper policies accordingly to regulate the cash holdings actions, in order to improve the usage efficiency of cash and the enterprise value. This thesis also has a realistic meaning for China's harmonious and sustainable economic development.On the basis of the domestic and overseas existing literatures and demonstrations, combining China's economic system specialty, studying 3138 cases of 523 listed manufacturing corporations in Shanghai and Shenzhen stock market from 2003to 2008, this thesis analyzes the influential factors of higher level of cash holdings among China's manufacturing industry and the influence of higher cash holdings on the corporations'operation.; Secondly from initial sample 523 listed companies, we selected three consecutive years living in the top 30% of manufacturing companies in 75 companies, defined as high corporate. We use two financial indicators ROA and ROE to Measure of business performance, the management of the enterprise performance by establishing the multiple regression model, analyzed the listed company large cash in Chinese manufacturing held in this behavior on subsequent performance influence; The end of the article listed company for manufacturing in 2006-2008 three years of cash disbursements activities statistical description.The Study shows:The cash holdings of domestic manufacturing corporations stand for 13.61% of the corporation's entire assets on average, and the highest level is 62.12%. And the tendency of cash holdings among the domestic manufacturing corporations first decreased and then increased between 2003 and 2008, and the lowest level of cash holdings occurred in 2006. The result of modeling the influential factors of higher level of cash holdings among manufacturing corporations shows that the level of cash holdings and the scale of corporation assets have an inverted u-shaped relationship. As long as the corporation's assets increase, their level of cash holdings would increase accordingly; however, when the assets increase to a certain degree, the level of cash holdings begin to decrease. The level of cash holdings, the cash substitute, financial Leverage and the shareholder protection level have a negative correlation with the level of cash holdings, and the bank debit, management fees also have a negative correlation with the level of cash holdings. But the growth opportunities, capital expenditure and dividend payment have a positive correlation with the level of cash holdings. The consequential operation achievements also shows that the high level of cash holdings have an outstanding positive correlation with the consequential operation achievements. The corporation with higher level of cash holdings shows better profitability and operation results, and the high level of cash holdings doesn't hinder its profitability. At the end of this thesis, the description and analysis the cash holdings situation in our domestic manufacturing corporations from 2006 to 2008 further improve the higher level of cash holdings of our listed manufacturing corporations accords with their interest fusion.