Industrial Features, Corporate Cash Holdings，and Firm Value

Liquidity of assets is very important when enterprises are facing the externalenvironment fluctuations, especially under the background of global financial crisis.Cash assets have highly liquidity, so they are effective stragies many enterprises usedto deal with the economic crisis. And industry characteristics have the biggest andmost direct impact on corporate cash holding policy during factors of externalenvironment. But there is less and incomplete research in this area.That’s the cause ofthis thesis.In order to study the relationships between industry characteristics and corporatecash holding, this paper selects the2007-2011China’s Shanghai and ShenzhenA-share continued listed companies as the study samples. Then we use statisticalmethods such as nonparametric test and regression analysis to make two aspects study.On the one hand, we study on significant differences of corporate cash holdingsbetween industries. Furthermore we analyse industry characteristics which haveinfluence on these differences. On the other hand, we study the inter-industryconvergence between cash holding of individual companies and the industry averagecash holding. Then examine the impact on corporate value of cash holding deviatecompared to the industry average cash holding. After empirical research we get fourresults. Firsly, there are prevalent significant differences of corporate cash holdingsbetween industries. Secondly, there are five industry characteristics such as industryassets structure, unique features of products, Product market competition, theuncertainty of industry income and industry regulation which have impact oncorporate cash holdings. Thirdly, there is inter-industry convergence between cashholding of individual companies and the industry average cash holding. So we can usethe industry average cash holding as the target level of cash holding. Fourthly, thepositive cash holding deviate compared to the industry average cash holding canincrease the corporate value while the negative cash holding deviate damage the corporate value.This paper gives a relatively comprehensive understanding of the impact ofindustry characteristics on corporate cash holdings policy relatively comprehensiveunderstanding. Further, we use the industry average cash holding as the target level ofcash holding for the first time, which provides empirical data for the impact oncorporate value of cash holding deviate. All in all, the findings of this paper canprovide a new new insight a useful reference for companies to determinev cashholding policy in the era of financial crisis.