An Empirical Study On Cash Holdings' Motives And Investment Behavior

Cash holding decision-making is one of important corporate financial decisions. Cash holding behavior reflects not only the company's financial strategy and business strategy, but also closely related to corporate governance and macro-system. Most investors concern whether cash holdings are the "value creation" or "value destruction". Western scholars do a large number of researches on cash holdings .Compared to Western countries, the research of China's cash holdings are still in the initial stage. According to existing research, the cash holdings of Chinese listed companies are much higher than listed companies of Western countries. Underlying reasons is that:①The development of capital markets is not yet complete, listed companies have higher cost from external financing;②China have unique ownership structure, state-owned shares in a holding position, poor protection of small shareholders, managers lack of internal motivation, So listed companies in China have serious agency problems.Preventive motive, trading motives and agency costs will affect the cash holdings of listed companies. By multiple regressions analysis testing which motive plays the most important role in diversified companies and a single companies cash holdings. And then analyzes how cash holdings affect the different investment behaviors and investment efficiency of the diversified companies and the single companiesAt the end, we got the following conclusions:①Self-interest motive cash holding plays the strongest performance in diversified companies; Precautionary motive cash holding plays the strongest in single companies;②The diversified companies are focusing on the fixed assets and short-term investment behavior, but the result of excess cash in fixed assets and short-term investment cannot improve the investment efficiency;③The investment behaviors under excess cash held by single companies are more focusing on fixed assets and long-term investment behavior, excess cash holdings lead to long-term investment cannot improve company performance, but the investment in fixed assets can improve the performance.