Analysis Of Chinese Market Enterprise’ Cash Flow Sensitivity Of Cash Holdings

In the study of corporate finance, the financing constraints hypothesis test is an important topic. In the transition stage of China, many structural defects of capital market are likely to lead to financing constraints, the investment behavior and cash holdings behavior of listed companies have been influenced deeply. Previous research are focus on the difference between investment-cash flow sensitivity by comparing the listed companies under the different levels of financing constraints in order to test the financing constraints hypothesis. Since then, this approach has been questioned by many scholars, a series of theoretical and empirical studies show that this method is flawed.Almeida and Campello (2004) began to explore with cash holdings of cash flow sensitivity to measure enterprise financing constraints, it is an important development of the traditional investment-cash flow sensitivity analysis method. Its theory is if the enterprise has financing constraints, its cash flow sensitivity of cash holdings is positive, if the company has not financing constraints, the cash holdings sensitivity has nothing to do with cash flow. In other words, the enterprise by financing constraints, forced to systematically from its internal cash flow "savings" more cash, for a rainy day in the future. In the study of China’s listed companies, Zhang Xiaoxia and Wu Chongfeng (2006) and Li Jin (2007) have adopted this method.Butin China has just started the research of the cash flow sensitivity ofcash, the use of model lack of some important control variable,could not comprehensive explanation of the change of corporate cash holdings. Therefore, in this paper, on the basis of previous studies, and use2002-2011China A-share listed company data as the foundation, use Almeida and Campello (2004) model, and on this basis to join for virtual variables neg, which is1if the company has negative cash flows. Using OLS and GMM model of corporate cash holdings of cash flow sensitivity analysis, for further research. So that we both can deepen the understanding of this kind of research method, and is likely to deepen the understanding of the influence factor of cash holdings.The linear relationship of Cash holdings and cash flow suggests that either the company faces positive or negative cash flow, cash holdings change the same size. However, Riddickand Whited(2009) in their paper briefly shows the medium and large enterprises show a kind of negative nonlinear-cash flow sensitivity of cash. However, this conclusion is not the focus of their research at that time. Therefore, after inspection confirmed that the cash holdings of cash flow sensitivity, we further for cash-cash flow sensitivity of asymmetry is studied. At present, in domestic has not been for the asymmetry of the cash-cash flow sensitivity of research, therefore, this is also in this paper, we study the innovation place.This asymmetry theory is based on the theory of financial management included the project evaluation and capital budget. When enterprises face net negative cash flows of the project, enterprise will terminate these projects to reduce the loss. Thus making increased their cash holdings. But as a result of project contracts, conceal the existence of bad news and the problem of agency cost, the enterprise in the face of these projects, the measures is not the end but continue to operate in a relatively long time. However, due to the financing difficulties, enterprises and the financing compared with financing constraints, less investment in new or existing non-profit projects. And when the current in the face of negative cash flow, will finish the project faster, because before its annual cash stock is not enough to keep its negative net cash flows of the project.Based on theoretical analysis and empirical results, this paper draw the following conclusions. First, China’s A-share listed companies’cash-cash flow sensitivity is positive, which are consensus with the domestic scholars research the conclusion; Second, China’s A-share listed companies’cash flow sensitivity of cash have asymmetry; Third, China’s A-share listed companies, compared with the enterprise has not financing constraints, the cash flow sensitivity of financing constraints company asymmetry is bigger.Based on the situation of China’s A-share listed companies, this paper puts forward the following Suggestions:Perfecting the information disclosure of listed companies should be mechanism; Strengthen the enterprise’s own risk identification and prevention; Supervision agency for management review and strengthen enterprises and strengthen the supervision of enterprises to the attention of the operating cash flow.