Study On The Relationship Between Cash Holdings And Over-investment Under The Perspective Of Macroeconomic Factors

The effective investment behavior of enterprises can provide adequate power to their Sustainable development and expand their benefits. And there is a great relevance of the investment behavior of enterprises and their level of cash holdings, different level of cash holdings will resulting in differences in the level of investment. The management can dispose more cash freely if they holding large of cash, and they will invest the corporate cash to their advantage project out of their own interests, that will increases the possibility of over-investment and businesses inefficient over-investment will be more serious. The impact of changing macroeconomic environment is a huge enterprise, macroeconomic fluctuations affect not only the level of cash holdings, making the company’s cash holdings fluctuate, but also affect the company’s investment opportunities, so that the level of corporate investment occurs changes affect the investment efficiency. But, there correspondingly lack of literature on the relationship among macro-economic fluctuation, level of cash holding and over-investment. Therefore, it is necessary to develop an academic research on introduce changes in the relationship between macroeconomic factors influencing corporate cash holdings and over-investment behavior, provide a reference for the Chinese government and enterprises to strengthen macro guidance to carry out management.On the basis of studying and summarizing existing literature, this paper choose financial data of 540 A-shares listing enterprises from 2007 to 2013, as study samples and studies the relationship between enterprises’ cash holding and over-investment, analyses the effect of enterprises’ cash holding on over-investment under the impact of macro economy by bringing in variable macro-economic elements, such as: economic growth rate, monetary policy and fiscal policy. The empirical results are that:(1) there is positive correlation between listed company’s cash holding and over-investment;(2) there exists difference for positive correlation relationship between cash holding and over- investment under the impact of different macro-economic element. When economic growth rate increases, the investment opportunities will increase, and the similar behavior of excessive impulse of blind investment will appear in the management, but shareholders and it will promote the positive correlation between cash holding and over-investment; when monetary policy is tightened, although enterprises face enhanced exterior investment pressure, enterprise will increase cash holding to release constrained financing pressure, it has no significant effect to the positive correlation between enterprises’ cash holding and over-investment; when increasing tax revenue policy of fiscal policy is adopted, the tax rate will increase while the government investment will decrease, and reduce the investment opportunities of enterprises, it can restrain over-investment inclination of cash holding. Therefore, the enterprises needs combine the macroeconomic factors with their own situation on the process of cash management and investment plans developed, make adjusted accordingly, Such as, improve the cash management system, strict control the approval process of investment projects, Strengthen the Supervision of shareholders and board of directors, advance the effective incentive plan timely and so on.