The Nature Of Property Rights, Law Background Managers And The Value Of Cash Holdings

As an asset of strong liquidity and easy operation,cash can enhance the corporate value because of providing protection for companies to seize the valuable investment opportunities.It may also damage to the value of corporate cash holdings,because the agency cost,inefficient investment and other issues have a negative impact to the enterprise.Existing literature shows that there is a general discount phenomenon on the value of cash holdings of listed companies in China.After the advancing of Higher Order Theory,domestic and foreign scholars research factors affecting the value of cash holdings from the perspective of executives’ feature,in order to provide new solutions to improve the situation of the value of cash holdings.Most of the existing studies provide empirical evidence for the value of cash holdings from the executives’ political background,bank background and other areas.However,the studies scarcely take the relationship between the legal background of executives and the value of cash holdings into consideration. Lots of foreign studies have found that the executives’ legal background as a characteristic property of the company will have an impact on the company’s cash holdings, as the company’s capital structure, investment decisions.China is a country ruled by law in a transition period,the government is gradually withdraw from the control of the market,the law plays an increasingly important role in the market competition.A large number of listed companies started to recruit executives with a legal background.Therefore,it makes sense that researches cash holdings affected by the legal background of company executives.Therefore,in this paper,in order to study the relationship between A-share listed company legal background executives and the value of cash holdings, I select companies listed in Shanghai and Shenzhen A-share between 2009 and 2014 as the sample,using the method of combining theoretical analysis and empirical tests.We making regression analysis about the model of the value of the company’s cash holdings to study the influence that executives impact on the value of cash holdings.And under different nature of property rights,which changes will happen about the relationship between executive who have legal background and the value of cash holdings.The results show that:1.generally speaking,hiring executives who have the legal background can increase the value of cash holdings.2.compared to non-state-owned listed companies,executives who have the legal background in the companies listed in the state-owned play a more significant role on enhancing the market value of cash holdings.Based on these conclusions,the paper gives the practice recommendations,such as hiring executives have a law background,improving the structure of executives’ constituting,strengthening the supervision of state-owned enterprises and so on.In addition,the innovation of this article is mainly manifested in the following two aspects:Firstly,this paper researches the relationship between executives background and the value of cash holdings from the perspective of legal background for the first time,further enriching the research of influencing factors of the value of cash holdings;Secondly,few scholars research the relationship between executives law background and the value of cash holdings.This paper researches the economic consequences of the legal background executive from the perspective of the value of cash holdings,further enriching the literature about law background executives.