A Research On The Listed Company's Behavior Of Cash Holdings Based On Financial Constraint

Cash holdings plays a significantly important role in enterprise's assets and is crucial to enterprise development.Holding a reasonable amount of cash is an important business strategy.Listed companies of China are generally in the face of financing constraints,which refers to financing cost differences caused by serious information asymmetry phenomenon.Listed companies of China have kept a high level of cash holdings for many years.From 2011 to 2015,the average level of net cash and cash equivalents amounted to company's net assets has been around about 16%.The existing studies have found that the listed company's internal cash holdings mainly comes from operating cash flow,and the motivation of cash holdings include transaction motive and precautionary motive.Whether the level of internal cash holdings kept from operating cash flows is affected by the level of financing constraints?Will the motivation of cash holdings of listed companies be affected by financing constraint level?These are the focus in this paper.Foreign scholars have completed numbers of studies in cash holdings,however,there are few studies with the combination of the level of cash holdings,the motive of cash holdings and corporate financing constraints background.At the same time due to the differences in capital markets and corporate governance,proposed theories and research technique of foreign studies,may not be suitable for China.Therefore,based on the characteristics of the socialist market economy in China,choosing more suitable indicators with relevant to China's national conditions,studying with the combination of the financing constraint level,the level of cash holdings and cash holdings motivation has important practical significance.Based on the domestic and overseas documents relevant-ed to cash holding theory and financing constraints,taking into account of the actual situation of China's data selection,we choose the size of the company and interest cover ratio as measurement of financing constraint to classify the listed companies.This paper chooses the data of 1444 listed companies from 2011 to 2015 as samples and gets 5684 valid data.Based on these data we build the construction model,descriptive statistics,and regression analysis.The study proves that financial constraint level of listed companies in our country have effect on the tendency of keeping internal cash from operating cash flow.Further investigation have been made about the strength of the precautionary motivation of cash holdings of listed companies under different degree of financing constraints.On the issue of measurement of the level of financing constraint,instead of choosing single variable or construct index,this paper chose the enterprise scale and the multiple of interest safeguard cash flow index of the division of the degree of financing constraints.According to the characteristics of listed companies in the capital market in China.By comparing enterprise tendency to keep cash holdings from operating cash flows and precautionary motivation of cash holdings under the different financing constraint conditions,the study found that:Firstly,high financing constrained company's cash holdings level significantly positively related to its operating cash flow,low financing constraints enterprise cash holding levels have no significant relationship with operating cash flows.That is to say,high financing constrained corporations' cash holding level is more sensitive to operating cash flow.The enterprises with high financing constraint tend to have stronger tendency to keep internal cash reserves.And due to more convenient financing channel,low financing constrained enterprises have no significant tendency to keep internal cash holdings.Secondly,high financing constrained corporations' cash holding level shows significant positive correlation with precautionary motive proxy variables,and for low financing constraints,the level of cash holdings and cash holdings precautionary motive have no significant correlation.That is to say high financing constrained enterprises pay more attention to cash flow volatility and investment opportunities.Low financing constrained companies,which are more convenient to get external funding to deal with emergency,will not hold high cash holdings for precautionary motive.In the end of the paper,some suggestions are put forward from different aspect for both companies with financial constraint and companies without it:(1)For companies with high level of financing constraints,the main factors that limit their development are high barriers to financing,the limitation of financing channels.It is difficult for companies with high level of financial constraints to get the lower cost of capital,which will affect the long-term development of them.Therefore high financing constrained enterprises should maintain a higher level of cash holdings,and actively broaden the financing channels.(2)For companies without financing constraints,due to external financing cost is relatively low,and having more financing channels at the same time,they do not need to keep high internal cash holdings to avoid waste of resources of the capital.Low financing constrained companies do not need to keep high level of internal cash holdings,but should strengthen internal supervision,and improve the utilization efficiency of funds.