The Development Of Regional Finance,Asset Tangibility And Economic Effect Of Cash Holdings

As we all know,cash is the company’s most liquid asset.The research on cash holdings and its economic consequences has always attracted great attention from the academic and practical circles.As an important content of business strategy and financial policy,maintaining a reasonable level of cash holdings is related to the survival,competition and long-term development of the company,and is affected by the external macro environment and internal characteristics.The topic of the economic impact of cash holdings on companies has gradually attracted widespread attention from company managers,capital market investors and related government agencies.Through theoretical reasoning and empirical analysis,considering the differences between provinces and the characteristics of enterprises,this article explores the role of regional financial market development and asset tangibility on cash holding strategies,the capital market value effect and the product market competition effect of cash holdings.It has important theoretical and practical significance.This article first reviews relevant domestic and foreign literature on cash holdings and their economic effects,reviews the opinions of different scholars,elaborates theories related to cash holdings,and defines the variables involved in the article,which laying a foundation for proposing theoretical assumptions.Based on the analysis of the mechanism of action and the related assumptions,this paper uses the relevant data of listed companies at Shanghai and Shenzhen Stock Exchanges from 2007 to 2018 as a research sample.From the external macro environment(financial development)and corporate micro characteristics(asset tangibility),an empirical study was carried out to test the influencing factors on the cash holding behavior of listed companies in China.After using descriptive analysis to recognize the statistical characteristics of the data and using correlation analysis to verify the model hypothesis initially,SPSS software was used to develop multiple linear regression.Further,based on the product market and the capital market,using regional financial market development and asset tangibility as moderating variables,the article studies how the two affect the economic effects of cash holdings.The study found that:(1)Asset tangibility and regional financial development all have a negative correlation with cash holdings;and the development of financial markets can reduce the negative correlation of assets tangibility to cash holdings;(2)the regulatory effect(The interaction term)is inconsistent with the direction of the main effect(univariate).The introduction of asset tangibility and regional financial development have a reverse regulating effect on the value effect and competition effect of cash holdings;(3)In particular,based on asset tangibility and regional financial development,the sample was divided into four groups.The group regression results confirmed the above result(2),and showed that in regions with low financial development,low asset tangibility can strengthen the value effect and product market competition effect of cash holdings.The strengthening effect is most significant.In order to verify the rationality of the model setting and the reliability of the empirical results,this article has performed many robustness tests by introducing instrumental variables and selecting alternative indicators.The results support the main conclusions obtained in this paper.Finally,proposing suggestions based on the empirical results,proposals are made for listed companies to formulate a reasonable cash holding strategy and strengthen internal financing capabilities,for the government to improve external financing environment and deepen financial system reform,and for financial institutions to improve credit services and innovative financial products,which could solve the "difficult financing" problem from multiple perspectives,and provide some valuable references for the companies’ strategy and the country’s policy making.