An Empirical Study On Factors Of Cash Holdings Behavior

The NPC and CPPCC have both emphasized the development of a new generation of information technology, strengthen the network infrastructure construction and promoted triple play to achieve substantive progress. American IT industry giants Apple, Google and AMD have been sticking to hold large amounts of cash. From2013first quarter results, Apple’s total cash holdings is up to＄137.1billion, an increase of12.9%over last year, more than Vietnam GDP$1236billion. Google’s2012year-end cash and short-term investments totaled＄41.8billion. AMD’s2012net loss of＄1.18billion, but its holdings of cash balance totaled＄1.2billion.2001-2011, the level of cash holdings of China’s IT industry has been far higher than other industries, and there are significant differences. The author attempts to analyze the factors of large holdings of cash on the IT industry.This study employed a combination of theoretical analysis and empirical test. First we overviewed the related corporate cash holdings determinants of cash holdings theory, chosen183listed companies of the IT industry in the Shanghai and Shenzhen Stock Exchange in China. This study implemented panel regression fixed effects model to analyze the unbalance panel data sample.This paper comes to the following conclusions:In China’s IT industry, the level of cash holdings is affected at the same time by the transaction motive, the precautionary motive and self-serving motives driving factors; the strongest affect is from self-serving motives driving factors, followed by the precautionary motive driving factors and transaction motive driving factors. It more difficult for small-scale IT companies to obtain external financing; expansion of the IT industry erodes a lot of cash by converting to the non-current assets. And the IT industry is more likely to arbitrage in the stock market rather than in debt financing. Therefore financial leverage is underutilized. By means of a good equity incentive methods, long-term interests of shareholders and management objectives of the senior managers in the IT industry converge, reducing agency costs. And at the macro economic uncertainty, the IT industry will hold more cash. Accordingly paper argues that China’s relevant government departments should strive to improve our capital markets and to broaden the financing channels and ways for China’s IT industry, such as the establishment of perfect intangible assets evaluation system for mortgages; China’s IT industry should strengthen cash management to ensure the continuing growth and expansion, improve the utilization of financial leverage and optimize the asset structure. Finally the IT industry has become a pillar industry of China’s economic development.