The Impact Of Capital Market Opening On Cash Holding Level And Value

On December 5,2016,China Securities Regulatory Commission announced the official launch of the interconnection mechanism between Shenzhen Stock Exchange and Hong Kong Stock Exchange(hereinafter referred to as "Shenzhen Hong Kong stock connect")and promoted the two-way flow between China’s capital market and the international capital market in coordination with the Shanghai Hong Kong stock connect mechanism operated on November 17,2014.It is another important exploration of China’s capital market opening to the outside world and further promoted the connection between the mainland stock market and Hong Kong stock market.Financing constraints are an important reason for enterprises’ high cash holdings,and the introduction of foreign investors has widened the financing channels of listed companies and further alleviated the financing constraints of enterprises.As an important part of the main assets of the enterprise,the holding level of cash is an important financial decision of the enterprise,which affects the daily business activities of the enterprise.Too high cash holding level will reduce the income level of enterprises,resulting in idle cash,while too low cash holding level will make enterprises lose good investment opportunities or unable to bear the cost of debt.Therefore,this paper takes "Shenzhen Hong Kong stock connect" as a quasi natural experiment to study the impact of capital market opening on enterprise cash holding level and value from the perspective of financing constraints.This paper first combs the research of domestic and foreign scholars on capital market opening,financing constraints,cash holding level and value,then reviews the motivation theory,trade-off theory,information asymmetry theory,financing priority theory,agency cost theory and free cash flow hypothesis,and then puts forward the research hypothesis of this paper by combining theoretical analysis with empirical analysis,qualitative analysis and quantitative analysis,The hypothesis of this paper is verified by descriptive statistical analysis,multicollinearity test,benchmark regression analysis and robustness test.This paper takes the "Shenzhen Hong Kong stock connect" mechanism as a quasi natural experiment,selects the data of Shenzhen A-share listed companies from 2012 to 2019,constructs a double difference model to study the impact of capital market opening on enterprise cash holding level and value,and combined with the intermediary effect model to test the intermediary effect of financing constraints in the process of capital market opening affecting enterprise cash holding level,Finally,it analyzes the impact of equity nature on the policy effect of "Shenzhen Hong Kong stock connect" through heterogeneity.This paper draws the following conclusions:(1)after the implementation of the "Shenzhen Hong Kong stock connect" policy,the cash holding level of the target company of "Shenzhen Hong Kong stock connect" is significantly reduced,which shows that the implementation of the "Shenzhen Hong Kong stock connect" policy improves the corporate governance,reduces the agency level,and the improvement of the quality of information disclosure can reduce the external financing cost of enterprises,so as to reduce the cash holding level of enterprises.(2)After the implementation of the "Shenzhen Hong Kong stock connect" policy,the financing constraints of the target companies of "Shenzhen Hong Kong stock connect" have been significantly alleviated,indicating that the opening of the capital market has expanded financing channels for enterprises and alleviated the financing constraints of enterprises.(3)Through the intermediary effect analysis,it is found that the financing constraint has played a part of the intermediary effect in the process of opening the capital market and reducing the cash holding level of enterprises,which shows that after the implementation of the "Shenzhen Hong Kong stock connect" policy,enterprises have expanded new financing channels,alleviated the degree of financing constraint,and enterprises’ willingness to hold cash out of preventive motivation has decreased.On the one hand,the opening of capital market directly affects the cash holding level of enterprises,on the other hand,it affects the cash holding level of enterprises with the help of financing constraints.(4)After the implementation of the "Shenzhen Hong Kong stock connect" policy,the cash holding value of the target company of "Shenzhen Hong Kong stock connect" has been improved,which shows that the opening of the capital market has improved the cash holding value of enterprises.The implementation of the "Shenzhen Hong Kong stock connect" policy can further optimize the cash allocation of enterprises and improve the use efficiency of cash assets.(5)In the implementation effect of the "Shenzhen Hong Kong stock connect" policy,compared with state-owned enterprises,cash holding behavior of non-state-owned enterprises is more sensitive to the implementation of the "Shenzhen Hong Kong stock connect" policy,indicating that the negative correlation between capital market opening and cash holding level is more significant in non-state-owned enterprises.This paper believes that the opening of the capital market will help alleviate the financing constraints of enterprises,reduce the level of cash holdings,further optimize the cash allocation behavior of enterprises and improve the value of cash holdings.Therefore,we should further promote the opening of the capital market.First,we should optimize the interconnection mechanism,gradually liberalize the daily trading quota,liberalize the control of short selling mechanism,improve the liquidity of capital,reduce the financing cost of enterprises and expand the scope of underlying shares;Secondly,improve the information disclosure system,reduce the degree of information asymmetry,and improve the supervision of voluntary information disclosure.At the same time,enterprises should strengthen the disclosure of personalized information;Finally,improve the investor protection mechanism,further improve the investor protection laws and regulations,improve the market review system,improve the market environment,use emerging technologies to build a regulatory system conducive to the opening of China’s capital market,improve the feasibility of regulation and optimize the enterprise credit rating system.