The Influence Of Diversified Investment Strategy On The Relationship Between Internal Capital Market And Cash Holdings

Conforming to the demand of the reform of domestic market economy system,the development of business groups is becoming more and more obvious.At present,there are about 75% of listed companies are affiliated to enterprise groups.In the context of complex environment,the business group urgently needs internal capital market to improve its financial situation,and cash is the most liquid asset in business group.At the same time,most of them will implement diversified investment strategies to diversify their business risks because of the large scale of business group.Therefore,the relationship between internal capital market and cash holdings has become a focus of the academic circle,and the influence of diversification strategy is also an important problem.The main purpose of this study is to examine the relationship between internal capital market and cash holdings,and discuss the moderating effect of diversified investments.It provides theoretical inspiration for the effective operation of internal capital market.Firstly,based on the domestic and foreign researches of internal and external capital markets,cash holdings,diversified investments,we define the relevant concepts,and the relevant theoretical basis is explained.In addition,we also analyze the relationship between the operational efficiencies of internal capital markets and the cash holdings.Secondly,we design the variables selected in this study,and put forward the hypotheses of the relationship between variables and the effect of moderating effect.We use the Malmquist index to measure the operational efficiencies of internal capital markets,and we also use the sum of cash and cash equivalents divided by total assets ratio to measure cash holdings.According to the “guidance of industry classification of listed firms”,the diversified investment strategy is divided into related and unrelated diversified investment strategies,and entropy and Herfindahl indexes are used to calculate the degree of diversification investments.According to the design of the variable and hypotheses development,we also design the econometric models.Thirdly,based on the some models designed in this paper,we use SPSS 19.0 to examine the significant difference of the cash holdings between subsidiaries and standalone firms.Besides,we further use Stata 12.0 totest the relationship between operational efficiencies of internal capital markets and the cash holdings,and confirm the moderating effect of diversified investment strategies.In order to further examine the relationship between them,this paper also consider the impact of ownership difference and shareholder structure to test the change of relationship between them.Finally,based on the empirical research conclusions,we illustrate the suggestions of optimizing the internal operation of business groups in the respects of improving the internal governance structure,coordinating the implementation of related and unrelated diversified investment strategies,and effectively adjusting the relation between subsidiaries.