The Analysis On The Determinants Of China Listed Companies’ Cash Holdings

Cash holdings are one of the most important financial strategies in the modern corporate management. It is not only related with the corporates’ daily operation and growth, but also the investment、financing and dividend polies. Firm cash holdings are not only affected by the firm’s financial and operating strategies, but also the corporate governance and macro-economic environment.In the late 1990 s, there came the phenomena that many companies in the foreign countries held a great level of cash and cash equivalents, which got some foreign researchers’ attention to further study the intention of the firm’s cash holdings and the related influential factors. The foreign researchers investigated the firm’s cash holding behavior from different points of view, like: Trade-Off Theory、Pecking Order Theory、Corporate Governance、Asymmetric Information Theory、Corporate Governance and the degree of legal protection for the investors. In the recent years, more and more people in domestic China began to look into the issues of China corporates’ cash holdings. However, China has quite different economic and regulatory environment compared with the other countries. The capital market in China is far from perfection. The empirical experiences in other countries may not apply to China. Therefore, it is very meaningful to study the firms’ cash holdings behavior focused on the listed companies in China, which could provide some valuable references for the companies’ strategy and the country’s policy making.This paper reviewed and summarized the theories and prior literatures related to the firm cash holdings. 1447 Chinese listed companies with 5 years’ data(2009-2013) were chosen for the empirical study on the influential factors of China firms’ cash holdings from the different perspective of the firm financial features 、 corporate governance and macro-economic environment. The study found out that: company size、financial leverage、growth opportunities and cash substitutes have negative correlation with the company’s cash holdings; debt structure 、 profitability、 cash-flow and dividend repatriation have positive correlation with the cash holdings. From the corporate governance perspective, equity centralization and the nature of the controlling shareholder respectively has negative and positive correlation with the cash holdings. The board size and managerial ownership didn’t pass the hypothesis test in the regression. From the macro-economic environment perspective, the company’s cash holdings have positive correlation with ECI(Macro-Economic Climate Index).