Empirical Research On Financial Constraints And Cash Holdings

Cash holdings, which is not only relate to corporate normal operation, such as pay for raw material, various taxes and employee compensation, but also relate to corporate financial behavior like investment, fund raising and dividend, etc, is an important of modern corporate financial management. However, excessive cash holdings can reduce the income level, lead to a high opportunity cost, or even raise the company’s management has cash of self-interested behavior in disguise; and too few corporate cash holdings will cause companies to lose good opportunities for investment and raise financial distress, affecting the company’s survival and development, particularly in the post-financial crisis era, sufficient funds for the development of enterprises and risk reduction is very important.There is already a high level of cash holdings in listed companies of China, only non-financial listed companies and non-listed insurance company, from2005to2010years, the average net cash and cash equivalents amounted to company net assets reached around21.24%. Compared with other assets, cash assets does not bring enough value to the enterprise, then, the problem comes up:Which factors and motivations lead to so much cash held in the company of China? How this motivation of cash holdings is performing? Keynes (1936) thought the motivation of transaction and precaution is the main reason of cash holding, and this paper will discuss the different performance of the motivation of transaction and precaution in different degree of restraint and cash holding level.By further study the domestic and overseas relevant documents of financing constraints and cash holdings, combining with the actual situation of China’s data selection, this paper constructs the financing constraints measure. And analysis the relation among financial constraint, cash holding and its’motivation. On the aspect of empirical study this paper collects the4408Panel Danas of736listed companies in the Stocks of shanghai and Shenzhen during the2005-2010Period, taking the cash holdings of listed companies as dependent, based on categorizing the listed companies according to the comprehensive. Index sign of financial constrains, investigates the effects of the degree of financial constrains to the cash holdings of our listed companies, through all kinds of statistics, and the performance of motivation of cash holdings under different levels of financing constraints.The results reveal that:First, compared to non-financial constraints companies, financing constraints companies have higher levels of cash.Second:there is a remarkable positive relationship between cash holding and cash flowing volatility in financial constraints companies;Third:Precautionary motive of cash holdings in financing constraints companies is stronger than non-financial constraints companies; and is stronger than its transaction motive;Finally, regardless of what way to classify, China’s listed firms face financing constraints or not. will directly impact on its performance of the motivation of cash holdings.