Does Collectivization Affect The Smooth Effect Of Cashholdings On Investment?

Investment and financing are the two most important financial decisions of an enterprise,and they are closely related.Generally speaking,investment has the characteristics of long time span and high risk,which makes investment have higher adjustment cost.In order to avoid high adjustment costs,enterprises have the tendency to maintain a stable investment expenditure,that is,enterprises have the motivation to smooth investment.The key problem to maintain the stability of investment expenditure is whether there is enough funds.In reality,various obstacles often make it difficult for enterprises to raise funds and achieve the goal of smooth investment.Specifically,in terms of external financing,because of information asymmetry and financing frictions in the external capital market,which leads to higher external financing costs;in terms of internal financing,because of the existence of operational risks,there is a corresponding greater uncertainty in the internal cash flow of enterprises.In order to cope with the financing dilemma in reality,both academia and theoretical circles have realized that the reasonable reserve and utilization of corporate cash can effectively mitigate the risk of cash flow and external financing constraints.Existing studies have shown that companies tend to hold a higher level of cash to cope with the high cost of external financing,financing shocks and other issues.However,most of these studies discuss the impact of internal cash flow or external financing risk on corporate cash holdings.There is still a lack of relevant research on how cash holdings affect corporate investment.The relevant empirical evidence needs to be expanded urgently.After the financial crisis in 2008,the uncertainty of external environment increased,which led to the increase of external financing costs and the corresponding increase of cash flow fluctuations.Therefore,this paper chooses the data of Shanghai and Shenzhen A-share listed companies from 2008 to 2017 as samples,and refers to Brown and Petersen's(2011)dynamic investment model to empirically test whether corporate cash holdings have a smooth effect on investment expenditure.The results show that there is a significant inverse relationship between investment expenditure and cash holding increment,indicating that enterprises use cash reserves to meet the investment needs,that is,enterprises hold smooth investment expenditure through cash.On this basis,this paper considers the widespread reality of group operation in China,relaxes the homogeneity assumption of independent operation implied in the existing research on the smooth effect of cash holdings,and explores whether group operation will affect the smooth effect of cash holdings on investment through grouping regression analysis.The results show that,because of the effect of group operation on saving financial liquidity funds,the cash holdings of group member enterprises are lower;and the smoothing effect of cash holdings of group member enterprises on investment is stronger than that of non-group member enterprises;further research shows that the higher the degree of group diversification,the stronger the smoothing effect of cash holdings on investment.In order to overcome the influence of endogenous problems,the PSM method is used to test the robustness.The results show that the research results are robust.