A Study On The Influence Of Institutional Investors’ Holding Upon Public Companies’ Cash Holding

Cash holdings are important financial management decisions, relating to the interests ofall parties, which is the result of various stakeholders after the game. In the companymanagement and ownership separation of the modern enterprise system, the interests ofmanagers and shareholders are not always consistent, so liquid assets are more easilyoccupied than fixed assets, and cash will be the best choice.The traditional evaluation system of corporate governance at home and abroad is notincluded institutional investors. With the rapid development of institutional investors in recentyears, institutional investors as corporate governance innovation are referred to improve theoriginal system of corporate governance defects. With the development of institutionalinvestors in recent years, it has gradually become an important part of the capital markets, andits development provides a new way of improving and implementing corporate governancemechanisms. Many researches show that institutional investors play a positive role inimproving capital markets and corporate governance.This article includes two parts: theoretical and empirical, which primarily from cashholdings motivation, corporate governance and shareholding structure theory, etc. to analyze.And research on the relationship between institutional investors’ holdings and publiccompanies’ cash holdings from theoretical analysis and empirical research. Taking the year of2008-2012Shenzhen motherboard A-shares and the Shanghai A shares as samples which arenon-financial listed companies. The article analyzed the overall holdings of institutionalinvestors and institutional investors heterogeneity effect on cash holdings of public companies,constructed multiple regression models to empirical analysis. The results showed that: Thereis a negative relationship between overall holdings of institutional investors and publiccompanies’ cash holding; There is a negative relationship between positive type ofinstitutional investors and public companies’ cash holdings, and so is uncertain institutionalinvestors. But there is a positive relationship between negative type of institutional investorsand public companies’ cash holdings. It exists a positive relationship between restricting theextent of institutional investors to the large shareholder and public companies’ cash holdings.When the ownership of the largest institutional investor is the controlling shareholder, there isa positive correlation between institutional investors’ holdings and public companies’ cashholdings. These findings suggested that institutional investors played a positive effect at all.To different institutional investors, they took different effects on cash holdings of listed companies; Chinese institutional investors in publiccompanies had very low stake. Considering their own interests, there is a possibility ofcollusion with the major shareholders; When they are the controlling shareholders, they havethe "entrenchment effect".For the results of empirical research, the paper put forward relevant proposals: includingincreasing the proportion of institutional investors, while we should pay attention toinstitutional investors’ internal differences. Meanwhile, efforts are also needed to strengthensupervision and punishment for institutional investors, so that institutional investors to betterplay their active role in the company to make better use of the cash holdings of the strongestliquidity, profitability weak special assets.