An Empirical Study Of The Impact Of China's Listed Companies Cash Holdings

Cash holdings is an important research topic in the field of Enterprise financial management. It is one of the factors that must be considered in the day-to-day running management, strategic choice, investment and financing decisions of the enterprise. The earliest studies of cash holdings can be traced back to1936, John Maynard Keynes proposed monetary demand theory which says that cash holdings motivation mainly have three aspects: transaction motive, precautionary motive and speculative motive. Subsequently, new ideas emerge constantly, such as the transaction cost theory which is about the influencing factors of cash holdings, trade-off theory, optimal sequence financing theory and agency theory, these theories set up a perfect research system about the influence of the microcosmic factors of enterprise on cash holding. As it is known to all, enterprise is one part of a whole society which cannot be separated from the external economic environment and exist independently, but throughout the cash holdings literature both at home and abroad, but there are few studies related to the external environment impact on the corporate cash holdings. Because of this, I hope this paper can build up a research system about the external environment factors on the corporate cash holdings and use empirical test to get constructive conclusion.Firstly, This paper will have an observation of the relationship between the cash holdings of listed companies in our country and the external environmental factors, which leads to the theme of the study. The second chapter summarizes the theory of cash holdings and reviews the related literature. The third chapter, I will analyse some factors related to cash holdings, like the institutional environment in our country, financial characteristics and corporate governance. After that, some empirical assumptions will be put forward. The fourth and fifth chapter will build a model corresponding to the theory hypothesis before. The empirical testing will use1040balanced panel data of China’s non-financial listing Corporation from2005-2010, respectively analyses the financial characteristics, corporate governance and external environment factors influence on corporate cash holdings. In addition the paper will use the method of grouping to study the corporate cash holdings sensitivity to the stock market under the condition of different groups. The last chapter summarizes the research conclusion and points out the limitation and future research directions of this study.The conclusion and contribution of this paper are as follows: 1.Start to divide the factors that affect the cash holdings decision into three parts:financial characteristics,corporate governance,and external environment.This way can distinguish the impact on the behavior of corporate cash holdings from internal factors and external factors. The classification helps to study of the decision problem of corporate cash holdings from a different perspective.2.The model predicts that the investment in liquidity is decreasing in the macroeconomic variables,including GDP growth,M2,Macroeconomic climate index.Cash expenditure effect from investment is greater than the cash inflow effect brought by business performance improvement.That means the overlay effect makes the negative correlation between macroeconomic cycles and cash holdings.3. This is the first quantitative research about speculative motives of corporate cash holdings.The stock market as an important factor of the external environment will affect corporate cash holdings through speculative motives.Conclusion as follows:①cash holding sensitivities of stock market return is increasing in the level of corporate profits and enterprise investment opportunities;②while it is decreasing in the number of managerial ownership and the proportion of state-owned shares.