Financing Constraints, The Excess Cash Holdings And Over Investment

Cash management decision-making, as an important financial decision, not only affects the daily production and business activities, but also has an important impact on short-term and future investment activities. Starting from the agency problem, the more cash holdings, the more investment activities. At the same time, the cash decisions are subject to the impact of financing constraints, when the enterprise financing difficulties, companies often choose to retain more internal funds. Financing constraints not only affect the cash decisions, but also affect the investment behavior of enterprises. Therefore, it is particularly important to study the relationship between excess cash holdings and over investment under the financing constraints. This article takes our country manufacturing industry listed companies’ data in 2010-2014 as samples, to research the relationship of the excess cash on the excessive investment under the financing constraints, to do some useful studies of financing constraints, corporeity’s cash decision and enterprise investment strategy, etc.First of all, this paper briefly reviews the relevant theories at home and abroad.On the basis of the theoretical research on the relationship between financing constraints, cash holdings and excessive investment; we put forward the research hypothesis. Then according to the research hypothesis, excess cash holdings and excessive investment relations as the key to construct the model of the article, and corporate assets, interest coverage ratio, financial slack, nature of the actual controller and whether to pay dividend as standard to inspect the enterprise financing difficulty. Then establish the related model and process the data. In order to study the financing difficulty of enterprises more accurately, this paper establishes the regression model of financing constraints and cash holdings by the five variables as grouping criteria. Finally, respectively, from the full sample and the financing constraints of regression analysis, clear the relationship about financing constraints, excess funds and over investment.Empirical analysis results show that: under the full sample, the study found that when the enterprise has more excess funds, it is more prone to excessive investment. The empirical regression model results show that, the listed companies in the manufacturing industry of our country are generally affected by a certain degree of financing constraints, but by the degree of financing constraints are quite different. Small size of the enterprise by financing constraints, but adequate funding, is more likely to occur over investment than the big size enterprise, showing the randomness of investment. And the interest margin is large, the financial constraints of the relaxation of the enterprise is small, when the enterprise has sufficient funds, more than the control group is more prone to excessive investment. And state-owned enterprises are more prone to excessive investment than private enterprises. Due to the impact of the policy, the central enterprises by the higher financing constraints, even they have adequate capital; it is not prone to excessive investment. The dividend payment of the enterprise depends on internal cash more, and not easy to excessive investment. This also shows that whether to pay dividends as a measure of the degree of financing constraints of enterprises is worth considering. This article’s research if useful to improve management system, manager supervision system, to design reasonable and effective investment policies and cash management policy, and also plays an important role for the introduction of enterprise financing policy design of government departments.