Excess Cash Holdings,the Quality Of Corporate Governance And The Efficiency Of Investment

Cash is the most important thing in company,and cash holdings are the key decisions during the corporate development.In recent years,the listed companies have more and more excess cash holdings generally all around the world.The economics consequences due to excess cash holdings have also become a necessary area for scholars to study cash holdings.But the conclusion of relationship between excess cash holdings and the efficiency of investment has been controversial.What's more,corporate governance is the effective mechanism to ordinate the stakeholders to search the maximization of firm value.So,whether this mechanism can have significant impact on excess cash holdings and the efficiency of investment also need more scholars to study carefully.On the basis of predecessors' work,this paper puts forward the corresponding research hypothesis and selects the listed companies of Shanghai and Shenzhen non-financial A-shares from 2010 to 2016 as research samples to analyse the relationship between excess cash holdings and the efficiency of investment.Also,the degree to which and the ways in which good corporate governance effect the relationships.Through the empirical researches,we can make some conclusions that: Firstly,when the level of excess cash holdings is low,the agency motive and the precautionary motive both can be suitable for companies.Therefore,the relationships between excess cash holdings and the efficiency of investment are not significant.But when the level of excess cash holdings is high,the companies is dominated by the agency motive.Therefore,the efficiency of investment will be lower.Secondly,when excess cash holdings are base on the precautionary motive,this companies can not easily happen ineffective investment and the quality of corporate governance also can not increase the efficiency of investment significantly.But when excess cash holdings are based on the agency motive,the efficiency of investment in this companies is lower.So,the good quality of corporate governance can be good for controlling the occurrence of the ineffective investment.Thirdly,this companies which have good quality of corporate governance can hold the lower level of excess cash holdings and can make use of them to do some value increment of investment.On the contrary,the companies which have poor quality of corporate governance maybe quickly and invalidly use excess cash holdings in financing and distribution of dividends.These activities all can make the efficiency of investment on the low side.Finally,we can find that operating performance that use excess cash holdings to invest is higher in the good quality of governance's companies,despite of holding more cash holdings.We also discover that conclusions because this companies can have greater efficiency in the use of holding cash to invest.Given the former conclusions and the present situation of domestic enterprise,this paper can provide some suggestions: Firstly,the firms should build a maximization of cash holdings to avoid idle resources.Secondly,the corporate also need build and improve the mechanism of corporate governance,and reduce the irrational distribution of resources and the problem of agency.Thirdly,the firms also can build correct sense of worth to formulate the decisions of cash holdings and investment.Finally,the external regulators need coordinate and supervise this corporate to build more perfect mechanism.