Research On The Peer Effect Of Cash Holdings In Listed Companies In China

Individual decisions are often affected not only by their own characteristics,but also by the behavior of groups with similar characteristics.This pheomenon is called the "peer effect".For any country,the phenomenon of herd effect is universal.In the process of traditional corporate finance research,the financial behavior of enterprises is regarded as the result of independent decision-making,and the influence of other companies’ financial behavior on their decision-making in the same industry is often ignored.This paper studies the existence and influencing factors of cash holding conglomeration effect in China.In order to explore the existence of cash holding conglomeration effect of Listed Companies in China and the influence mechanism of cash holding conglomeration effect,this paper empirically analyzes the data of A-share listed companies from the first quarter of 2007 to the fourth quarter of 2017.The generation of cash holding conglomeration effect is based on the mechanism of information imitation and competitive learning,and comes from the social learning of managers and the awareness of prevention of market competitors.The proximity of geographical distance between enterprises in the same group will enhance the conglomeration effect of cash holdings;the intensification of industry competition will also enhance the conglomeration effect of cash holdings.Furthermore,it tests the relationship between information influence and mutual learning between leaders and followers,as well as the degree of financing constraints of enterprises,which will also affect the conglomeration effect of cash holdings.The results show that:(1)the cash holding of Listed Companies in China will be affected by the cash holding of the same group companies,which indicates that the cash holding behavior of Listed Companies in China has the peer effect;(2)when the geographical distance between the same group companies and individual companies is close,the influence of the same group companies on the cash holding behavior of individual companies increases,which indicates that the geographical distance reduces the access to decision information cost,which produces more imitation or spillover effects,promotes the learning and imitation of decision-making behavior among companies;(3)when in a highly competitive industry,the same group company has a greater impact on the cash holding behavior of individual companies,indicating that the more fierce the industry competition,in order to maintain the competitive position in the industry,the company will enhance learning and imitating the decision-making behavior of the same group company.It is further found that:(1)compared with peer effect of cash holdings of industry followers and leaders,the peer effect of leaders with higher market share and higher market value of the company was more obvious;(2)the greater the degree of financing constraint,the more obvious the conglomeration effect of enterprise’s cash holding.The findings not only enrich the research on the influencing factors of cash holding behavior of Listed Companies in China,but also expand the research on the conglomeration effect of financial decision-making of Listed Companies in China.It has important management enlightenment for the listed companies to make the decision of cash holding,especially in the industry with relatively fierce competition.When making the decision of cash holding,the company should consider the average cash retention of the enterprise,and rationally select the companies that can reduce the cost of information acquisition such as the proximity of geographical location as the learning object.Both leaders and followers should make more rational use of the peer effect.Government agencies and regulatory departments should encourage and guide the diffusion of effective decision-making,and try to avoid the industry’s " If you live with a lame person you will learn to limp" caused by the peer effect.