Monetary Policy, Cash Holdings And Investment Research

Research on the relationship between the fluctuations in macroeconomic policy and the subject behavior of micro-enterprises has gradually become a new area of research in accounting and finance. The influence of monetary policy on cash holdings of listed companies, which in turn impact on investment is the further explore in this new field of study.Existing research found that for different monetary policy, the company will choose different policy of cash holdings and investment.By studying the Monetary Policy Report published by People’s Bank of China on the website, and the data in "bankers questionnaire survey" finished by the People’s Bank of China and the National Bureau of Statistics, We measure the degree of monetary policy tightening. We use 2010-2014 Shenzhen A-share listed companies in the manufacturing sector as a sample. We examined the effect of monetary policy adjustments on cash holdings and investment policies by empirical method. We also examined the implementation of monetary policy under different circumstances, how the cash holdings affect the investment policy.Empirical findings are as follows: (1)When the monetary policy is tightening, the company will increase the level of cash holdings; when monetary policy is loose, the company will reduce cash holdings. (2)Tight monetary policy inhibited investment spending; loose monetary policy has a role in promoting investment. (3)In the period of monetary policy tightening, cash holdings will reduce the investment-cash flow sensitivity, the company has the phenomenon of under-investment.In the period of loose monetary policy, cash holdings will increase investment-cash flow sensitivity, the company exists the phenomenon of over-investment.According to the study, this paper presented two proposals from the company’s internal and external angle. Companies should strengthen internal management reforms, improve the independent directors and senior management ownership system, optimize cash management, standardize the investment decision-making procedures, improve the information disclosure system and the transparency of corporate information.The Government should provide policy support to improve the capital market, offers a variety of financing. This research can provide the company with a targeted and clearer policy options, when they in the face of changes in the macro-monetary policy.