Research On The Relevance Of Minority Shareholders’Protection And Cash Holding In The Company

As everyone knows, since entering the new century, China’s capital market flourished, which has achieved remarkable achievement. However, since the US subprime crisis, more and more people recognized the two sides of the returns and risk of capital market. Especially in recent years, China’s capital market was always in a bear market, which was a great blow to the confidence of investors, and it has brought China’s small and medium-sized investors great harm. At the same time, accompanied with controlling shareholder’s behavior of grabbing company’s assets, the problem of small and medium-sized investors’protection has arose more and more people’s attention. Therefore, form the view of holding shareholders’preferences, researching the problem of Investor protection will have great significant on the development of China’s capital market.In this paper, I research on the relation of investor protection with inadequate investment and corporate cash holdings form the point of holding shareholders’ cash choice of China’s listed companies. In essential, I pay my attention on the relationship between investor protection and the controlling shareholder’s assets choice. Through the study of related literature at home and abroad, I find out that it is not easy to find same opinions from the this accepts, more researchers pay their attention on the relationship between Investor protection and ownership structure or Investor protection and the value of the company. In this paper, I research in a different approach, and it will do well for corporate governance.In the process of studying the relationship between investor protection and controlling shareholders’choice of assets, I Choose both the methods of standard research and empirical research method. In the theory section of the paper, I choose standard research method; As to the empirical part, I choose the integrated use of descriptive statistics analysis, correlation analysis and regression analysis and so on. Specifically, firstly, I use appropriate investment model for regression and select out samples of underinvestment; secondly, make inadequate investment amount (absolute value) to be explained variable, analyze the correlation relationship between investor protection and inadequate investment; Thirdly, I make company’s cash holdings to be explained variable, analyze the correlation relationship between cash holdings and investor protection and do corresponding regression analysis; Lastly, make Robustness test to Guarantee the robustness of the results.Through the results of the study, we found that external investor protection can effectively inhibit underinvestment, increase the company’s cash holdings, eventually improve the company’s cash value; However, Cash flow right of controlling shareholders will stimulate underinvestment, what’s more, since controlling shareholders tend to hold cash and liquid assets, eventually they choose the inadequate investment and cash holdings, but in this case the company cash value will decrease, which harm the interests of company. According to the results, I provide policy recommendations in order to strengthen investor protection, which will purify the capital market environment of our country, protect the interests of small and medium-sized investors, improve the efficiency of the company’s investment, speed up the flow of the cash, and at last create greater value for company.