Geographic Location,High-speed Rail Opening And Cash Holdings

The company’s cash holding level is an important decision of the company’s financial and business strategy.It is the company’s strategic response to investment and financing,internal governance,and external market environment,and ultimately affects corporate value.Novel coronavirus swept the globe since the beginning of 2020.A lot of enterprises have stagnated their production and operation,which has brought huge losses to the global economy.Especially SMEs have faced the risk of business failure due to the shortage of cash.On the one hand,holding cash can resist the impact of similar black swan events,but on the other hand,as a scarce and easily occupied resource,holding too much cash can also lead to agency problems,reduce the value of enterprises and other problems.Therefore,how to determine a reasonable cash holding level and improve the value of cash holding is an important issue related to the long-term development of enterprises.In the past,most of the research on the influencing factors of cash holding focused on the micro level of the enterprise’s own financial characteristics,internal and external governance mechanism,and the macro level of the industry,monetary policy,institutional environment,and so on.Few scholars pay attention to the geographical location.The geographical location reflects the geographical distance between the enterprises in the jurisdiction and the regulatory authorities,customers and investors,which has a significant impact on the decision-making behavior of enterprises and their stakeholders.From the perspective of information asymmetry,this paper summarizes three possible influence paths of geographic location on cash holdings from the perspective of “preventive motivation”,“agent motivation” and “overinvestment motivation”,and improve the theoretical analysis framework of geographical location and cash holdings.Through an empirical analysis of A-share non-financial listed companies from 2007 to 2018,the empirical evidence unanimously shows that the mechanism of geographical location’s impact on the cash holdings of listed companies in China is in line with "overinvestment motivation".Companies located in remote areas,always facing with a higher level of information asymmetry,so the agency conflicts is more serious.Then management or major shareholders tend to make more excessive or even inefficient investments to consume cash quickly and reduce cash holding levels and holding values for self-interest motives.This effect is more significant in companies with high agency costs.The opening of high-speed rail improves the accessibility of cities along the line,reduces the transaction cost between regions,accelerates the flow of information,capital,labor and other elements,which to some extent makes up for the impact of geographical location on cash holdings,and improves the value of cash holdings.The research of this paper expands the research scope of new geographic economics in the field of corporate finance.By introducing the external environment of geographical location,the research on the influencing factors of cash holding is enriched.In addition,it provides empirical evidence from the micro enterprise level for the opening of high-speed railway to improve the efficiency of capital use,and provides policy suggestions for the government to optimize resource allocation and efficiency through infrastructure construction.