The Determinations Of Cash Holdings Adjustment Speed In Listed Companies

Cash holding adjustment speed as the focus of cash holding decisions, which hasbeen concerned by the academic circles; meanwhile cash holdings dynamicadjustment has been played the entrepreneurs’ close attention in the competitivemarket. To further increase flexibility of the cash holding dynamic adjustmentdecision and help businesses figure out what their barriers to adjustment are. We formthe bridge between the asymmetric adjustments and the determinations of adjustmentspeed, not only analyzes the connotation of the cash holdings adjustment speed andthe cause of asymmetric adjustments, but also analyzes the decisive factors whichaffect the adjustment speed of cash holdings based on the asymmetric adjustments.Using the data of Chinese listed firms from2000to2009, this article based onthe asymmetry and heterogeneity of cash holdings adjustment speed across firmsestablishes extended adjustment model to test the decisive factors which affect theadjustment speed of cash holdings. The results show that:(1) There is optimal level ofcash holdings, but the adjustment speed is low;(2) There is strong evidence to supportasymmetric adjustments. That is, the adjustments from above the target aresignificantly faster than adjustments from below;(3) Company characteristic factorshave different effects in the adjustments from above the target and adjustments frombelow. The adjustments from above the target is determined by the deviation fromoptimal cash holdings, the scale of firms, the growth and the corporate governancelevels, the adjustments from below is determined by the deviation from optimal cashholdings, the scale of firms, the adjustments from above the target is significantlynegative related to the deviation from optimal cash holdings, but the adjustments frombelow is negative related to it. Relations between the corporate governance levels andadjustment speed illustrates the precautionary motivation of cash holdings;(4) Themacro environmental factors not play it’s proper role on adjustment speed.