Studies On The Value Of Cash Holdings For The Listed Company In China

Research on cash holding behavior is a core issue in the company's financial management field.It is the key to a company's normal production,operation,and development,and it is closely related to internal financial decisions,investment decisions,and dividend policy.Scholars have studied earlier on the behavior of corporate cash holdings,and gradually formed a theoretical system based on trade-off theory,pecking order theory,and free cash flow theory.At the same time,from the perspective of empirical research,combining different company characteristics and external institutional environment,scholars analyzed various factors affecting the company's cash holdings behavior and its value,and reached different conclusions.Based on the principal-agent theory,some scholars believed that because of the existence of self-interest motives of major shareholders or management,the company's holding large amounts of cash will damage the company value.Based on the precautionary motive of cash holding,holding large amounts of cash can mitigating the problem of insufficient investment caused by the difficulty of obtaining external financing,the company believes that maintaining a relaxed financial policy is conducive to increasing the value of the company.In China,in order to deal with the adverse economic fluctuations and intensified competition in the product market,the cash holdings of listed companies are generally high,and cash holding policies have attracted much attention.However,there are endogenous problems between many factors and the company's cash holdings.These endogenous issues will affect the market's accurate valuation of the company's cash holdings.For example,based on the precautionary motive for holding cash,it would be considered that if the other conditions are the same,the company with ample cash reserves should have a low probability of financial distress.But this is not the case,because in a certain situation,once the company realizes that it is close to the border where financial distress occurs,it will instead adopt a conservative cash policy.The occurrence of "stock crash" in June 2015 provided a favorable exogenous event impact on the company's cash holding value.This article uses the year of 2014-2015,and the quarterly data as the research sample to test the market value of cash based on the occurrence of "stock crash".Research shows that when a "stock crash" occurs,investors will re-evaluate the value of the company's internal liquid assets,the marginal value of each additional unit of cash will be higher than usual,and this value increase effect is even more favorable in China's better investor protection areas.Further research have found that the increase in the marginal value of the unit cash is caused by the company's investment activities,after controlling the company's cash flow and growth,the company with sufficient cash can ease the situation of financial constraint,solve the problem of insufficient investment,then help the company to maintain a good investment ability and increase the value of the company during the "crash" period.Based on empirical research conclusions,this paper believes that cash is a very important hedging tool in responding to fluctuations in the external financing environment and alleviating financing constraints.it is necessary to keep a certain level of cash in company.Meanwhile,improving the institutional environment and strengthening supervision of the external capital market,and gradually improving the situation of investor protection in China are currently important issues to be resolved.