Government Intervention Diversification And The Value Of Cash Holding

The relationship between the government and enterprises is always the focus of the business as a whole, but also the theory academia too. It’s also the inevitably face problems among the process of economic development, especially for the Chinese enterprise under the economic transition. It’s the goal of the scholars to deal well with the relationship between the government and enterprises and to promote enterprise’s value. The scholars discuss the influence of government intervention to corporate business behavior, analyses the relationship between the government and enterprises, especially the diversified business management behavior. Cash is the important assets in the enterprise operation process; especially the cash in the listed companies in China is almost twice as many as in America. So, there emerges a lot studies on cash holding behavior, however, the influence of business operation behavior to the value of the enterprises differs a lot, particularly, the economic outcome of the diversification is different. External system environment of the enterprises have an effect on the cash, which as an important part of enterprise value. For this reason, this article concentrates on the relationship among the government intervention、diversification and holding cash value.Based on the previous research foundation, this article discuss the relationship between government intervention and diversification, study the relationship between diversification and holding cash value as well, make an exploratory look at government intervention、 diversification and holding cash value. Along well with the mode of "government intervention-business diversification-cash holding value", in the article, in order to discuss the relationship between the government and enterprises, we concentrate on the cash holding value and finally explore the influence of diversification to cash holding value. This article tries to analyses whether the diversification affect cash holding value and the influence of diversification to cash holding value in the different degree of government intervention, which will make an effectively guidance to the enterprises behavior.This paper makes an empirical study on the government intervention diversification and holding cash value, which base on the listed companies from2008to2011on stock markets of Shanghai and Shenzhen. This article discusses the influence of government intervention to diversification and the influence of diversification to cash holding value. On that basis, this paper makes a further step to explore the relationship among the government intervention、 diversification and cash holding value. The results of the study are as follows:firstly, government intervention has a positive influence on diversification, in which marketization index is as the government intervention degree. Secondly, compared with professiona operation, the value of cash holding in diversified enterprise is lower. Thirdly, the stronger the government intervention is, the lower the enterprise value is and the lower the cash holding value is, in which marketization index is as the government intervention degree. Fourth, the stronger the government intervention is, the lower the enterprise value is and the lower the cash holding value is, in which the ultimate controller is as the government intervention degree.