Construction Of Financial Constriants Index And Its Effct On Coporation Cash Holding Policy

Financing difficulties for enterprises in China is a big problem for both entrepreneurs and politicians,especially the financing difficulties in small and medium-sized enterprises and private enterprises.Imperfect market makes the external financing more expensive then internal financing,which is the reason of financial constraints.Enterprises tend to relay on retaining operating cash flow.This thesis selected proxy indicators of financial constraints from two aspects,debt financing and equity financing,to sort and group the listed companies.Then the thesis chooses the cross-linked samples as the group of high financial constraints group and low financial constraints group.Referring to literatures,the thesis chooses explanatory variables from four aspects to build financial constraints index: leverage,cash abilities,investment opportunity and company size.This paper finds that the probabilities of financial constraints of all listed companies go down,private-owned enterprises and small companies have greater probabilities of financial constraints,manufacturing industry has greater probability but real-estate industry has smaller probability.This paper analyses the effect of financial constraints to cash holding policy from two aspects: cash holding level and cash to cash flow sensitivities.This thesis finds that listed companies in the all are cash to cash flow sensitive,which means the majority of listed companies in China have financial constraints to some extent.And companies have greater probability of financial constraints tend to have greater cash to cash flow sensitivity,but the difference between different financial constraints groups is not big.As companies with greater financial constraints probability have lower cash flow,these companies have lower cash holding level.