Banking Structure, Internal Capital Markets And Corporate Cash Holdings

All along, cash is seen to be company’s "blood", which level of holdings also reflect a company’s financial and business strategy of major financial behavior. However, China’s listed companies have a higher level of cash holdings and the corporate governance is weak(Lu Zhengfei, 2009; evaluation of the research group Corporate Governance of Nankai University, 2010) and is constantly improving(Chen ball,2011),cash utilization efficiency is not high. ICM has a natural advantage for corporate capital allocation, which is configured for enterprise funds through subsidiaries or branches.On the one hand, ICM provides effective operation to ease financing constraints through a variety of ways. On the other hand, the agency conflict between headquarters and the department manager makes alienation of ICM department manager for rent market, and agency conflicts between controlling shareholders and minority shareholders of the Group’s ICM makes alienation for the channel transfer of benefits. Therefore, it grasps two most important factors from perspective of ICM by exploring its impact on the behavior of members of the company’s cash holdings, which has a Further expansion of related research underlying causes of behavior to company’s cash holdings. Bank structure and ICM have different impact on cash holdings by path or mechanisms, so they have different effect on the utility. What’s the relationship between them, alternative,complementary or conflict? The issue has a strong theoretical and practical significance to strengthen cooperation between ICM and ECM in improving the efficiency of capital allocation.Increased competition in the banking sector, to some extent, alleviate the problem of corporate financing constraints, while the bank based on its own information and personnel can implement supervision and management functions. This paper studies the impact on cash holdings from bank structure from the perspective of financing and bank debt to provide a theoretical basis as to market-oriented reforms of banking structure and give full play to the effectiveness of bank governance.Based on the comprehensive review of the relevant research results, the impact on the level of cash holdings were studied through a new perspective-bank structure and ICM. In addition, a further investigation is made in order to know the relationship between ICM and ECM. Through an empirical model tests, we find that:bank Structure and Cash Holdings corporate banking has a significant negative correlation; Compared with non-Group companies, Group companies has lower cash holdings; The more efficiency of ICM, the lower are member’s cash holdings, both of which showed a significant negative correlation. Bank and ICM have a positive effect on cash holdings. Taken together, it is an alternative effect between ICM and ECM. There are some inspiration from the results of this study: Firstly, we should optimize the structure of banking competition and strengthen bank governance role; In addition, we should strengthen the Group’s enterprise management and supervision and establish an effective restraint mechanism.