An Study On The Effect Of The Listed Companies’ Corporate Governance Structure On The Cash Holdings

Companies’cash holdings is one of the hot spots of the academic research, it is also an important financial behavior of the company’s business strategies. Chinese and western scholars have done a lot of theoretical and empirical research on the cash holdings from different angles, and have achieved rich results. Companies’cash holdings is closely linked with the companies’corporate governance structure. But China is undergoing the system of economic transition, and the listed companies exist in a special institutional background. There are a lot of practical problems in the companies’governance structure, such as the unique ownership structure, the unsound board of directors, the defective corporate governance mechanisms and so on. Well, whether the companies’governance structure affects the company’s cash holdings? What factors affect the level of corporate cash holdings? Whether the western theory on cash holdings can explain the behavior of listed companies’cash holdings? There will be a test of the theoretical analysis and empirical on these issues.On the basis of reviewing the motivation theory, dynamic pecking order theory, this paper analysis the various important factors of listed companies’governance structure in depth, and divide these factors into three main areas, ownership structure, board characteristics and cash dividend policy. This paper introduces a number of other control variables which have an impact on cash holdings, and put forward hypothesis. On the basis of theoretical analysis, we selected719sample companies and2149study samples in all from listed companies in Shanghai from2009to2011, and do descriptive statistical analysis and multiple regression analysis to these study samples about the phenomenon of company’s cash holdings. Empirically research the impact of the ownership structure, board characteristics and preference of company’s cash dividend on the level of cash holdings in listed companies.First, this paper empirically tests affections of the three represents variable of the ownership structure including stake of the largest shareholder, the alliance of minority shareholders and managers’shareholding with cash holdings relations. The study found that stake of the largest shareholder has positive correlation with cash holdings and the alliance of minority shareholders has significant negative correlation with cash holdings, which shows that the proportion of largest shareholder is higher and the proportion of minority shareholder is lower, more listed companies tend to hold higher cash. But managers’ shareholding has no significant correlation with cash holdings of listed companies.Secondly, this paper empirically tests affections of the three represents variable of the board characteristics including size of board, the proportion of independent directors and managers’professional background with cash holdings relations. The study found that the size of board is larger, the higher the cash holdings of listed companies is; Managers of listed companies with financial and economical background listed companies hold more cash than that with non-finance and economics background; But the proportion of independent directors has no significant correlation with cash holdings of listed companies.Taking the listed companies’policy of cash dividend into consideration will have a major impact on its cash holdings in a certain period. This paper further empirically tests the relationship of the preference for cash dividend and cash holdings. The study found that if the listed company prefers cash dividends, it will hold the higher cash.Finally, based on the foregoing findings, this paper proposes policy recommendations: Listed companies should improve the listed companies’governance structure from the ownership structure, board system and the policy of cash dividend. First, we should further improve the ownership structure of listed companies; Secondly, we should strengthen and improve the system’s construction of the board; Furthermore, the determination of the amount of cash holding and policy of cash dividend are complementary; Finally, we need to focus on other factors about outside of the corporate governance structure which have affection on the level of cash holdings in listed companies.