The Impact Of Devaluation And Devaluation Expectations Of Rmb On The Level And Value Of Cash Holdings

In 2005,China entered a new stage of the exchange rate policy reform.The RMB began to implement a floating exchange rate system based on the market supply and demand.At the same time the central bank adjusted the exchange rate with reference to a basket of currencies.From 2005 to 2013,the RMB against the U.S.dollar had been in the state of unilateral appreciation.However,at the beginning of 2014,the RMB began to depreciate.The exchange rate policy can influence the behavior of the companies through price,foreign direct investment and international trade.As one of the most important business activities,the cash management is not only closely related to the daily production acitivies,but also related to the investing and financing activities.Based on this background,this paper studies the impact of RMB devaluation and RMB devaluation expectations on micro company cash holding activities.This paper selects all the Shanghai and Shenzhen A-shares data of listed companies from 2010 to 2016 as the research sample,using the empirical tests to examine the impact of the devaluation and devaluation expectations of RMB on the cash holdings and the value of cash holding.Finally,the paper found that:(1)When the RMB was expected devaluation or devaluation,the level of cash holdings declined.And the phenomenon existed in the companies of both low export dependence industries and high export dependence industries.(2)When the RMB was expected devaluation or devaluation,the value of cash holding increased.And the phenomenon also existed in the companies of high export dependence industries.Through the further study,we found that:(1)For the companies with low financing constrained,the level of cash holdings declined under the state of the RMB devaluation and devaluation expectations.For the companies with high financing constrained,the level of cash holdings had no significant change under the state of the RMB.But when the RMB is expected further depreciation,the level of cash holdings declined in these companies.(2)For the companies of high growth in the high export dependence industries,the value of cash holding increased under the state of the RMB devaluation and devaluation expectations.For the companies of low growth in the high export dependence industries,the value of cash holding had no significant change under the state of the RMB devaluation and devaluation expectations.The results of this study enriches the research on the influence of exchange rate policy on the micro-enterprise in China.At the same time,the paper also has a certain significance for the government's macro control and the cash holdings management in the companies.