The Empirical Research On The Relationship Between Excess Cash Holding And Investment In Chinese Manufacturing Companies

Manufacturing is the most important industry of the national economics, and determines China's international status. Manufacturing companies'investment scale is bigger, especially foreign investment. The key to invest is capital, especially facing financial constraints Therefore, the research of the relationship between excess cash and investment in manufacturing companies is of great oretical and realistic significance.According to asymmetric information theory, an excessive of cash holding will on the basis of free cash flow theory, corporate holding excessive cash will lead to the phenomenon of over-investment. Whether the excess cash that the enterprise holds will cause excessive investment or not? Whether different financing constraints affect excess cash investment efficiency or not? This article will to study these questions. The purpose of this essay is to have a system of understanding of the relationship between excess cash and investment under different financing constraints in Chinese manufacturing listed companies through empirical research. We hope can provide theoretical support and empirical evidence for enterprises to select the reasonable cash hold policies and investment policies, and help government to draw up perfect policy and relevant regulations.First, this paper reviews researches about relations between the company's cash holding and investment at home and abroad, and then the article analyses and then the article analyses the relations between corporate cash holdings and investment behavior using the asymmetric information theory and the free cash flow theory.Based on the above the theorial analysis,the paper builds a model on cash holdings factors combined with China's financial and governance characteristics of China's manufacturing listed companies, and selected the data from 2006 to 2009 of the manufacturing listed companies,then carried out Empirical Test.Found out the significant influence factors of cash holdings. Then uses influence factors of cash held as variable to estimate excess cash holdings, and concluded companies that hold excess cash over three years. On this basis, this paper selects the company scale to measure financing constraints degree. Then analyze under different financing constraints the influence of the excess cash to investment and excess cash investment efficiency empirically. Draw the following conclusions: under high financing constraints, investment is more sensitive to excess cash holding, excess cash can improve enterprise investment efficiency, and avoid underinvestment; under low financing constraints, the excess cash easily cause excessive investment and reduce the investment efficiency and damages the company performance.This paper studies the influence of excess cash on investment and excess cash investment efficiency, and further analyzes the financing constraints would affect the excess cash investment efficiency. On this basis, this paper selects the company scale to measure financing constraints degree. Draw concludes that when having excess cash, enterprise tends to use excess cash to invest, but investments are inefficient, they can damage the enterprise performance. In the enterprise of high financing constraints, financing constraints will suppress this negative effect. But in low financing constraints enterprise, the excessive investment is more serious, the impact of financing constraints on investment efficiency is not big.