| For a company, how much cash should be preserved is one of the important questions that call for much deliberation, since it involves with many basic aspects of a company’s daily operation such as working capital management, liability management, risk control and budget management, etc. Besides, the significance of a good cash holding decision obviously there for grasping business opportunities and confronting potential crisis. The key factors of this decision-making in different industries and companies will be considered differently in accordance with their unique business model and market regulations.We have entered into a new economic epoch with ever fast changing technologies and endless stream of new products and originality. It seems that Enterprises who want to be the industry leader need to possess core hi-tech and many companies in Fortune500are good examples. However, there are several problems restrict high-tech companies’development. Firstly, China’s high-tech enterprises started late compared to developed countries, the financial system and laws regulation are not sound enough to provide a high-tech company’s needs in surviving and development. Secondly, our high-tech enterprises generally face financing constraints, this objective reality forces these enterprises to strengthen the internal funds management. Thirdly, it is full of uncertainty and unknown in the development process and cash flow is different from other companies in the industry since R&D activities require huge investment in cash, the risk of investment makes it more difficult to determine the cash flow and the long cycle of development lead cash into stages. All in all, these are all factors which make cash holdings decision more challenged in high-tech enterprises.The article includes the following five parts:The first part is introduction. An overview of the background and significance of this topic will be elaborated in advance. Then it comes with the domestic and foreign literature review and summary of financial constraints, financing and R&D activities in high-tech corporate, as well as the relationship between R&D and cash holdings. After the summary, methods and innovation are stated.The second part is theories and assumptions. Firstly, the paper will define the key concepts; Secondly, asymmetric information theory, theory of constraints and tradeoff theory will be illustrated; thirdly, on the basis of analysis of the relative theory, the hypothesis of this paper will be made.The third part is empirical research design. First of all, explains the sample selection method and data sources. Secondly, selects proxy variables. Last but not the least, presents the models for empirical research.The fourth part is empirical testing and analysis. Firstly, the descriptive statistics of variables involved in the models will be elaborated; then, tests and analysis on the three above models will be summarized and the result will also be introduced here; finally, a robust test is needed for the fourth model.The fifth part is the conclusions and policy suggestions. Firstly, the research conclusions will be reviewed again; secondly, in accordance with the problems found during the research process, the author makes some recommendations; eventually, there are some adjustments need to be refined and suggest the research directions in the future research.This paper selected1135high-tech companies listed in Shanghai and Shenzhen A-share market, those companies are from computer, communications and other electronic equipment manufacturing industry, pharmaceutical manufacturing industry and information transmission, software and IT services industry. After the research in theory and empirical field, we got conclusions as follows:(1) Generally speaking, our high-tech enterprises are facing with financial constraints problems and this problem has restrict the high-tech enterprises’R&D activities;(2) the bigger of the financial constraints index, the higher of the cash holding-cash flow sensitivity. |
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