Research On The Influence Of Corporate Cash Holdings On Business Performance During Post Financial Crisis Era

Cash is critical financial resource, it has a significant impact onoperating, investing and financing, and there is a close relationshipbetween cash and business performance.It is an important corporatebehavior that formulating an appropriate policy of cash holdings afterconsidering the pros and cons, and it can report the financial strategy andgovernance of the corporate. After the financial crisis happened in theyear of2008, it attracted a lot attentions of scholars that the cash holdingsof listed companies increasing dramatically.Firstly, we review the revolution of theories on cash holdings, andgeneralize and summarize the conclusions of researching on theinfluencing factors of cash holdings and its influence on corporateperformance from domestic and overseas. Secondly, we analysed the cashholdings level and its motivation of the listed companies during from2005to2011(the period before financial crisis and post financial crisisera) based on Trade-off theory and Agency theory to provide the basis forthe later analysis in the paper.In the paper, we build a model about cash holdings’ influence oncorporate performance, and the result reports that high level cashholdings lead to good performance in Post financial crisis era. Accordingto the phenomenon that listed companies greatly improve the rate of cashholdings, we build another model to find out whether increasing cashholdings can cause the increasing of operating performance, then theresult prove the answer is yes. We suggest that: high cash holdings leadsto good performance, and increasing cash holdings leads to the increasingof the performance especially during economic fluctuation period.