The Effect Of Social Norms On Cash Holding:A Study From Chinese Listed Companies

The academia has put forward four hypothesis toward the influence of listed companies' cash holding issues,which are transaction motivation hypothesis,prevention motivation hypothesis,tax motivation hypothesis and agency cost hypothesis.Meanwhile,scholars have noted that cultural factors,same with the economic system and legal systems in sociology,play an important role in financial decision-making both at the individual and firm levels.Recently,sociology and corporate finance research has been extended to social norms and corporate finance research.Will the social norms have a same significant impact on cash holdings of listed companies?At present,domestic researches about the impact of social norms on capital market is limited to the influence of social norms on the proportion of institutional investors' holdings,but no discuss at the impact of social norms on cash holdings.From the perspective of social norms to study the company's cash holdings,not only enrich the exploration issues of listed companies' cash holdings,but also provide the internal logic for companies to follow the behavior of social norms.In this paper,companies are firstly divided into criminal companies and non-criminal companies in accordance with social norms.Two types of extreme industries:alcohol companies and pharmaceutical companies were selected as representative,taken the listed companies from 2011 to 2015 as samples to explore the difference of cash holdings between them.It is found that social norms do not have obvious impact on cash holdings if before they affected by formal norms.However,obvious negative effect are found among criminal companies after they affected by formal specification.It means the cash holdings of alcohol companies are much more than pharmaceutical companies.Moreover,there also exists positive relationship between cash holdings and shareholding ratio of institutional investors from these two industries,and provide further evidence that social norms have management function on cash holdings.Furthermore,institutional investors are one of the main ways of financing of listed companies,and are more susceptible to the influence of social norms,the point of view of this paper can be supported by analyzing the difference of institutional investors.Thus,this paper argues that social norm will affect the cash holdings of listed companies through external financing,and the effect of formal norms is more significant than informal norms under the social background in China.This paper not only enriches the existing research on cash holdings,but also finds a new perspective from the effect which social norms on capital market,and innovatively analyzes how the social norms affect the listed companies from the perspective of "cash holdings".