Product Market Competition,Property Rights And The Value Of Cash Holding Of Company

In recent years,China's listed companies hold more cash assets,especially when the enterprise is facing a more severe competitive environment,there usually be a substantial increase in the proportion of cash assets.According to agency theory in traditional finance,cash is easily occupied the and cash assets is often an important tool for immoral behavior,enterprise holding more cash may means that the agency problem is more serious.In recent years,scholars expand corporate cash holding research from the traditional financial theory to product market competition theory of the industrial organization,for our understanding of company's cash holdings decision provides a new perspective.Product market competition theory argues that corporate cash holdings can not only respond to competitor's threat,but also implement a series of predatory behavior designed to enhance the market competitiveness,expanding market share,which is called predatory effect of cash holding.On the other hand,the fierce product market competition can improve the internal governance and the use efficiency of cash by signal effect and bankruptcy threat,which is the governance effect of product market competition.Because the value of cash holdings is final evaluation of investors to cash utilization efficiency,corporate cash holdings decision and the predatory effect and governance effect cash play in the product market are ultimately reflected in cash holdings value.Therefore,this paper choose from the value of cash holdings to study.Combined with the aforementioned theory,this paper aims to explore three issues:First of all,can the company holding cash bring value to the enterprise,is the more cash holdings the better for enterprise value?Secondly,discuss the influence of the degree of competition during industries on the value of cash holdings.that is,in the monopoly industry or in the competitive industry the value of cash holdings is higher?Finally,because there are many differences between companies with different property rights,whether the degree of competition in the production market has different effects on the state-owned enterprises and non state-owned enterprises?Using the method combining theory and empirical analysis,taking the A share listed companies of our country as the sample in 2003-2015,this paper divides the research into the following parts:Part one(Introduction)introduces the framework of this paper;the second part reviews the relevant literature and analyzes the related theory;the third part combines with related theory and puts forward the main hypothesis of this paper;the fourth part is the empirical research design,describing the model and variables defined;the fifth part through empirical analysis to verify the hypothesis;the sixth part illustrates the conclusions of this study and put forward the corresponding policy recommendations.The results show that:(1)the cash holdings of the company can bring forward the positive value effect,and the higher the company's cash holdings,the higher the marginal value of the company's cash for the company;(2)the degree of product market competition can affect the company's cash holdings value realization,on the whole,our cash holdings of listed companies is more in line with the predatory effect theory,if the company is located in more concentrated industries,the value of cash holdings will be more;(3)distinguish the nature of property rights to speak,for the non-state owned listed companies,because it hasoperating advantage and a higher level of cash holdings,in more concentrated industries,it can make full use of predatory effect to have a higher value of cash holdings;for the state-owned listed companies,due to serious agency problem,coupled with higher financial leverage,fierce competition in the industries can mitigate the agency cost and improve fund use efficiency,which has a higher value of cash holdings.(4)Further examination revealed,the governance effect ofproduct market competition for state-owned listed companies is mainly reflected in the second agency problem,namely,thehigher the second type of agency cost,themore significant the governance effect of product market competition is.Product market competition and the first kind of agency problem of internal governance is complementary relationship,the lower the cost of the first kind of agency cost,the more obvious the governance effect of the product market competition.