The Research Of The Relationship Among Financing Constraints, Cash Holdings And Inefficient Investment

As Chinese capital markets developed later, so there is a congenital System defect, coupled with that financing constraints, corporate governance mechanisms are inadequate, in reality, there are different degrees of non-efficiency investment issues on many businesses. Inefficient investment is becoming a direct obstacle, lists companies’value-added business and expands the scale of development. In order to meet the investment needs and timely seize the favorable investment opportunities, enterprises will tend to hold a lot of cash. In view of these, it is so important to discuss and study the relationship among the financing constraints, cash holdings and non-investment.The main methods of researching the relationship between Financing Constraints and cash holdings are the investment-cash flow sensitivities and cash-cash flow sensitivity theory. Many scholars believe that corporates that suffer financing constraints have higher cash flow sensitivity; the corporates that do not suffer financing constraints have lower cash flow sensitivity. That financing constraints and investment-cash flow sensitivity showed a positive correlation. Papers select multivariate regression methods to measure financial constraints by constructing financing constraints index, comparing to cash flow sensitivity and cash-Investment cash flow sensitivity it is more extensive on selecting financial indicators and more complete in measuring corporate financing constraints.Domestic and foreign enterprises to invest in research financing constraints and efficiency method is mainly related variables selected criteria as a measure of financial constraints, then according to the variable size of the sample they sort the sample into three or subdivided into more groups, then researching business investment efficiency in case of different circumstances of financing constraints groups. Papers is quantified financing constraints as a financing constraints index, then directly adding it to the model to further study the relationship between mathematics and corporate financing constraints in inefficient investment.Papers select cash holdings as a starting point, researching the relationship among financing constraints, cash holdings and Inefficient investment. Selecting five financial indicators including the asset-liability ratio (LEV), net working capital (NWC), return on equity (ROE), market value and book value ratio (MTB) and cash dividends/total assets (DIV), paper select the method of binary logistic regression models to measure financing constraints. It normalize cash and cash equivalents at end of the period divided by the business total assets value to measure the amount of corporate cash holdings, then studying the relationship between financing constraints and the cash holdings. Selecting the total asset growth (GROWTH), asset-liability ratio (LEV), cash holdings (CASH), the company set up time (AGE), company size (SIZE), the company invested scale (INV), the total return on assets (RET) constructs inefficient investment model to measure the efficiency of corporate non-investment issues., the resulting residuals of method of least squares regression measures the inefficiency of investment. Finally, paper designs model to study the relationship among Financing constraints, Cash holdings and Inefficient investment at the basis of financing constraints index, cash holdings and non-efficiency investments that are standardized.