Study On Cash Holding And Its Relationship With Performance

Cash is a crucial financial resource for the enterprises. Cash assets involves all aspects of business operation, we can say which can exert great impact on the management, investment, fund-raising of the enterprises, and is close correlated with the enterprises'operating performance. So, for corporations, analyzing the advantages and disadvantages of cash holding and determining the proper cash holding amount is important in financial management, which also reflects the corporate financial strategy and governance generally.Firstly, The paper reviews the influence factors of cash hold and its relationship with performance. Secondly, based on the static tradeoff theory, information asymmetrical theory, Pecking Order Theory of Financing, the theory of agent and cash free flow theory, the issue of corporate cash holding and analyses its relationship with performance is analyzed theoretically.On this basis, the paper of the company's cash holdings of the company's performance and found a significant positive correlation between the two, which means more corporate cash holdings, the better the performance of the company.Then the model of the influential factors about the listed corporate cash holding is set up combined with the financial and governance features of listed corporations in China. Furthermore, data from 2004 to 2006 are chosen to make empirical studies. Five factors like financial leverage, cash substitutes, the future growth opportunities, capital expenditures, the first big shareholdings ratio and have negative correlation with cash holding, while factors like cash flow and dividend payments have positive correlation with cash holding. In addition, company size, bank debt ratio, Shareholders protection have no effect on cash holding.