Research On The Relationship Between Ownership Structure And Abnormal Cash Holding Of Listed Company

The topic on cash holdings is always one of an important issue of financial management in modern enterprise. The cash holding of an enterprise has a close relationship with daily production, business activities, business investment decisions, financing decisions and dividend policy of an enterprise. If a company holds the excess cash, the company will pay for the opportunity cost because of the redundant cash. On the contrary, if a company holds too little cash, funding problems in all aspects of production and operation enterprises cannot be guaranteed. From here we see that abnormal cash holdings will be unfavorable to the development of enterprises. Because the ownership structure of enterprises is the basis of enterprise governance structure. Different ownership structure determines the different corporate governance structure. From this point of view, ownership structure is the key factors decide enterprise behavior and performance. So do the cash holding behavior. If the shareholding structure of an enterprise is very reasonable, shareholders can implement effective supervision on managers, shareholders can balance each other, the company’s cash holdings will be maintained at a normal level. On the contrary, if the enterprise’s ownership structure is not reasonable, the shareholders cannot implement effective supervision on managers, the company’s cash holdings will deviate from the normal amount, the enterprise will has excess cash holding. Modern enterprise has excess cash holdings in China.Based on above discuss, ownership structure will have a certain impact on corporate excess cash holdings in our listing corporation. This paper starting from the angle of the ownership structure of China’s listing corporation based on theory research methods of empirical research, specific studies on the relationship between the above two, to make the corporate cash holdings to the normal level.This paper is divided into six chapters, each chapter follows:Chapter1Introduction This chapter describes the significance of research from theory and reality, following the ideas and framework of research are described. This paper sets abnormal cash holdings of the listed companies as the main target to research and discourses the significance to research the effect that ownership structure of listed companies is to abnormal cash holdings. This part also put forward the research objectives and the innovation.Chapter2Research ReviewThis chapter firstly reviews the literature and research at home and abroad on the cash holdings of enterprise. In the process of the reviews, author finds that foreign scholars on this issue make a great quantity research and fruitful success. On the contrary, domestic scholars on this issue still in the infancy stage and make less research. First of all, the theory for structuring the model to calculate the level of abnormal cash holdings is that company level factors determine the level of normal cash holdings of corporate. Secondly, the target of this paper is research the relationship between ownership structure and abnormal cash holding of listed company. Based on above two points, both foreign and domestic scholars in this part are dissertated in two following aspects:①The scholars that set the variables about company level as influencing factors.②The scholars that set the variables about ownership structure as influencing elements.Chapter3Theoretical AnalysisThis chapter first defines the cash, abnormal cash holdings and ownership structure, and puts forwards the econometric model of abnormal cash holdings. Then this chapter reviews the theoretical basis that the research relies on.Secondly, this chapter disserts the theoretical basis on the ownership structure and abnormal cash holdings. Based on increasingly prominent problem about the first agent and the second agent after split share structure reform in our country, and conflicts of interest among governor, major shareholders and minority shareholders, this chapter sets agency theory as the core and asymmetric information theory as auxiliary to start on. Above all is the theoretical basis of the relationship between excess cash holdings and equity structure.Chapter4Empirical Research DesignThis chapter first based former theory foundation divides the shareholding structure factors that affect abnormal cash holdings into following six points to research. They are the proportion of management shareholding, the proportion of state-owned stock, the proportion of corporate shares, the proportion of shares in circulation, ownership Concentration, and equity balance degree. After respectively explain influence that above six points affect the company’s abnormal cash holdings, this chapter puts forward six hypotheses. They are the positive correlation between the proportion of management shareholding and corporate abnormal cash holdings, the positive correlation between the proportion of state-owned stock and corporate abnormal cash holdings, the negative relationship between the proportion of corporate shares and the abnormal cash holdings, the negative relationship between the shareholders and the company’s abnormal cash holdings, the positive correlation between degree of ownership concentration and corporate abnormal cash holdings, and the negative correlation between the degree of equity balance and the enterprise’s abnormal cash holdings.Secondly, this chapter makes a detailed description of sample and data sources that this paper uses to make empirical research. After defines the explaining variables and the explained variables, this chapter sets up the research model of this paper.Chapter5Empirical AnalysisThis chapter begins with the use of statistical analysis software to calculate the normal cash holdings regression statistics, multivariate statistics and analytic statistics, and then in the same descriptive statistics, the ownership structure and the excess cash holding model correlation coefficient analysis and regression analysis, then to do a further test of the stability. The results reflect the following six points:the positive correlation between the proportion of management shareholding and corporate abnormal cash holdings, the positive correlation between the proportion of state-owned stock and corporate abnormal cash holdings, the negative relationship between the proportion of corporate shares and the abnormal cash holdings, the negative relationship between the shareholders and the company’s abnormal cash holdings, the positive correlation between degree of ownership concentration and corporate abnormal cash holdings, and the negative correlation between the degree of equity balance and the enterprise’s abnormal cash holdings. All above results prove the hypotheses proposed in this paper and draw the final conclusions of this paper. Chapter6Results, Countermeasures and Suggestions and Research ProspectsThis chapter first draws research conclusion of this paper:the chapter makes policy recommendations as follow:①Carry out managerial incentive measures in reason, and reconcile the conflict of interest between shareholders and managers actively to make sure managers and shareholders formed the same interests. Then managers will be better management of the company for the interests of shareholders and themselves. At the same time, the company’s cash holdings will tend to normal level.②Strengthen supervision of major shareholders, found an effective checks and balances, enhance the efficiency of equity restriction, reach a point that reduce abnormal cash holdings.③Improve the legal protection system to manage the company’s cash holdings so that it can greatly improve the managers hold cash cost, the phenomenon of company abnormal cash holdings will gets corresponding improvement, at the same time it also can suppress the desire to embezzle company cash assets.The main contributions of this paper follow:(1) Content of research is of prospective. This paper tried to study the relationship between excess cash holdings and equity structure of listed company in our country. However, the research of this field is relatively small in China. Unlike the research on the influence the ownership structure is to cash holdings, abnormal cash holding is the value of the deviation from normal cash holdings. It is accurate and in-depth to study the relationship between excess cash holdings and equity structure, and also exclude the impact of different enterprises scale. This makes content of the research is of prospective.44(2) The latest research data to reflect the latest trends, this selection is the share of Chinese in Shanghai and Shenzhen stock market reform after the non-tradable shares reform. The new trends of this can problem of reaction, the continuity of research is also guaranteed.Ideas for Improvement are:(1)Author of this paper constructed the static model, however, the cash holdings of listed company is changing. Propose to construct dynamic model to avoid it, make more accurate study.(2)Because cash holdings is the company’s financial decision-making, it has close contact with the company’s business activities and fund-raising and the use of state. But these factors usually difficult to quantify collection, so it is worth considering to actively looking for an alternative to variable to reduce the deviation of the model set.(3)Because this paper use a large number of explanatory variables in the selection of the research methods and by Pearson correlation test. It is not having a multi problem, but it is not completely eliminated. So when the regression test use means of distribution regression. However, some scholars abroad in order to avoid this phenomenon in the study of technology they use a fixed effects regression method and two-stage regression. Propose further studies may be considered to draw foreign scholars and better to avoid multi problem.