Media Attention, Equity Incentive And The Value Of Cash Holdings

Cash is the most liquid asset of an enterprise.The enterprise will hold a certain amount of cash for the needs of the transactions motive,the precautionary motive,the speculative motive and so on.Since the end of last century,both in the foreign market and in the domestic market,the companies have had a large amount of cash,which caused the wide attention of scholars both at home and abroad.However,the existing literature found that since the separation of control and ownership,most investors are not directly involved in the corporate governance and the company is actually controlled by the management.Moreover,the cash assets have characteristics of high liquidity and low profitability.Thus,the value of cash holdings of listed companies in China is always lower than the book value and there is a discount phenomenon.Thus,widespread agency cost is an important factor of this phenomenon.Therefore,in this case,it is significantly necessary for us to study how to solve the principal-agent problems,to reduce the agency cost and to promote the value of cash holdings.Based on the previous literature,equity incentive and media attention are both important mechanisms of corporate governance,they are important measures to solve the principal-agent problem.Equity incentive as an important internal mechanism,giving managers a certain number of shares,to make the interests of shareholders and managers consistent,to motivate managers dedicated to servicing for the long-term development of the company.It determines that the equity incentive has a very important role in resolving the problem of the value of cash holdings due to agency costs.With the implementation of equity incentive is becoming more and more popular,how to design it and do it in which environment must be considered in the process of corporate governance.Then,it can make the total costs minimized.In addition,in the highly informational society,the media's influence is huge,it not only can play its functions in daily operation of the company on the behalf of the public supervision,but also can transfer the company's information,even can play role in shaping public opinion.As a result,the media is an informal external governance mechanism,which plays an important role in the corporate governance.However,the existing literature pays less attention to the relationship between the media attention and the value of cash holdings.Thus,it is another focus of this study.Finally,this paper also observed that both equity incentive and media attention can restrain the opportunistic behavior of executives,reduce agency costs and improve the value of cash holdings.What's more,the current literature found that media attention can enhance the effects of equity incentive.Accordingly,this paper expects the media attention can positively enhance the effects of equity incentive to the value of cash holdings.Therefore,based on all A-share listed companies in stock markets of Shanghai and Shenzhen from 2012 to 2015 as sample,checking the relationship of media attention,equity incentive and the value of cash holdings by establishing the panel data and multiple regression model,we can come to the following conclusions:(1)The value of cash holdings of listed companies in China is generally in a discount,and this phenomenon is more serious in the state-owned listed companies.(2)There is a significantly positive correlation between the equity incentive and the value of cash holdings,that is to say,equity incentive can promote the value of cash holdings.Moreover,the further study found that compared to the non-state-owned enterprises,equity incentive in state-owned enterprises plays more significant role in promoting the value of cash holdings.(3)There is a significantly positive correlation between the media attention and the value of cash holdings.Under different property rights,the effects of the media attention on promoting the value of cash holdings are both significant.(4)The relationship between the equity incentive and the value of cash holdings is affected by the media attention positively,and further study found that compared with the non-state-owned enterprises,the positive adjustment effect of media attention in state-owned enterprises is more significant.Based on the above conclusions,this paper puts forward some suggestions from the aspects of improving the equity incentive,strengthening the management of the media industry,and the rational use of the functions of the media management.In addition,the main innovations of this paper are as follows: Firstly,there are few scholars studying the effect of media attention on the value of cash holdings.In this paper,the relationship has been proved through the theoretical analysis and empirical test,and it enriches the research of the value of cash holdings.Secondly,in this paper,it firstly study how the media attention affect the relationship between the equity incentive and the value of cash holdings,and it can enrich the literature of the corporate governance and the theory of the value of cash holdings.