Government Intervention,Ultimate Ownership And The Amount Of Cash Holding

Cash holding policy is a hot topic in finance.The amount of cash holding is influenced by corporate internal characteristics and external environment.China is still in the economic transition period.Each region exists different degree of government intervention.Government intervention has great impact on the amount of cash holding.Meanwhile,the amount of cash holding has a certain relationship with ultimate ownership.Government intervention has different impact on companies with different kind of ultimate ownership.Therefore,the paper will combine external environment government intervention and internal corporate governance factor ultimate ownership to study how these two factors influence the amount of cash holding.Based on the agent theory and information asymmetry theory,the paper considers special institutional background and ultimate ownership in China,from the perspective of government intervention motive(local financial pressure)and intervention opportunity(political relevance),taking into account the "support" effect and the "plunder" effect of government intervention,theoretically deduces the influence of government intervention on the amount of cash holding in listed companies in China as well as companies with different kind of ultimate ownership.The paper adopts 15,595 effective sample observations in Chinese non-financial listed companies from 2008 to 2015 on the Shanghai and Shenzhen Stock Exchange.The paper applies ordinary least squares(OLS)to empirically study the influence of government intervention and ultimate ownership on the amount of cash holding.The research shows that government intervention has negative correlation with the amount of cash holding.Comparing with non-government controlled enterprises,the negative impact of government intervention on the amount of cash holding is stronger in government controlled enterprises.Comparing with central-government controlled enterprises,the negative impact of government intervention on the amount of cash holding is stronger in local-government controlled enterprises.When the development of the region is well,the negative effect of government intervention on the cash holdings will be weakened.When the development of the region is rough,the negative effect of government intervention on the cash holdings will be strengthened.The conclusions of the study have reference value for the formulation of the corporate cash holding strategy,the improvement of the government environment and corporate governance mechanism.