Diversification Strategy,Marketization And Corporate Cash Holdings

Cash is the blood of a company's survival and development.It not only maintains the normal production and operation of the company,but also helps companies to cope with urgent situations and crises.The companies have started to hold large amounts of cash since the 1990 s,which has attracted particular attention from the academia.Many scholars have explained the factors both internal and external,affecting the corporate cash holdings from the perspective of agency conflict and information asymmetry.However,there are few studies focusing on the company's business behavior.The diversification strategy is a business behavior that most enterprises will implement.Therefore,it is necessary to study how the diversification strategy will affect the corporate cash holdings.At the same time,China is experiencing the process of “transition system” economy.Thus,it is essential to take the possible impact of the macro environment into detailer consideration when studying the company's micro-behavior and strategic decision-making.Based on the aforementioned background,this thesis firstly reviewed and summarized relevant literature and found out the research gap on cash holdings.Secondly,this thesis proposed hypotheses by combing relevant theories and literatures.By doing so,this thesis took the manufacturing listed companies as the research object,and collected the time-sequence data from 2012-2016 to be the research sample,and empirically tested the relationship between the diversification strategy and corporate cash holdings.Furthermore,this thesis examined the moderation of the marketization and afterwards finished the robustness test.Finally,this thesis explored the differences between property rights and agency conflicts.Conclusions are designated as follows:(1)The diversification strategy is negatively related to the corporate cash holdings.(2)The marketization weakens the negative relationship between the diversification strategy and the corporate cash holdings.(3)In private enterprises,the marketization weakens the negative relationship between the diversification strategy and corporate cash holdings more obviously.(4)There are also significant differences of marketization effect under different agency conflicts.This thesis proposes the following suggestions from the company and government aspects according to the previous research.(1)The manufacturing listed companies should improve the skill of managing cash holding.(2)The companies should pay more attention to internal governance genuinely when implementing the diversification strategy.(3)The government should speed up the process of marketization,while developing and enhancing the marketing strategies and legal system.(4)The government should promote the reform of state-owned enterprises and mend the unbalanced phenomenon of “discrimination of ownership” in private enterprises.The innovations and contributions of this thesis are mainly reflected as follows:(1)The existing literature lacks a closer look on the impact of the company's operating behavior.This thesis chooses to study the corporate cash holdings from the micro-behavior of the diversification strategy.(2)There is little literature mentioning the role of the marketization in the relationship between diversification strategy and corporate cash holdings.In this thesis,the diversification strategy and marketization process are included in the same framework to comprehensively examine the mechanism of cash holdings,and differentiated analysis from the two aspects of property rights and agency conflicts.Therefore,the research perspective has a modest degree of novelty.(3)This thesis focuses on the research of listed companies in the manufacturing industry.It provides practical implications for business practitioners about how to make strategic decisions and optimize the company's resource allocation for better development and transformation.