| Cash holding theory is an important theory of corporate finance. Modigliani and Miller (1958) think that in perfect capital market holding cash is no necessary. However, in the reality capital market, due to the existence of the transaction cost, and the information asymmetry of enterprise and the creditors, the management and the shareholders, the external financing costs than the internal financing cost, may limit the ability of the enterprise investment. Financing constraints theory considers that constraints corporate holding cash is valuable, which can make the corporate obtain larger financial flexibility, when facing investment opportunities, the corporate have the ability to catch all kinds of profitable investment opportunities, and won’t give up. And free cash flow theory argues that, due to the existence of agency costs, the management will hoard cash at the expense of the shareholders’ interests and to meet their personal self-interest. It is clear that two theories are opposite for cash holdings explanation. So when the agency conflicts and financing constraints exist at the same time, cash holdings can present what kind of trend? How will they affect the value of cash holdings? Putting together financing constraints and agency problems, it has great practical significance to research the influence of the interaction effect of financing constraints and agency problems to cash holdings.Based on the related literature of cash holding, this article analyses how the main agency conflict in China, large and small shareholders influence cash holdings and value effects from the enterprise external financing constraints, and further investigate if improving investors protection can constraint large shareholder’s behavior, and influence cash holdings and value effects. The full text is divided into seven chapters, the specific content of each chapter is as follows:Chapter1puts forward the research background and research significance; The definition of the related concepts, The research target and research content; research framework and research methods; research improvement and innovation, etc.Chapter2combes the research literature of cash holdings and value effect from the perspective of financing constraints and corporate governance.Chapter3summarizes three theories of cash holding, transaction cost theory, agency theory and financing constraints theory.Chapter4analyzed the present situation of cash holdings and the characteristics of corporate governance and equity financing and bank credit financing system about China’s listed companies from cash holding’ time characteristics, industry characteristics, area characteristics.Chapter5using financial data and market data of Chinese listed companies from2005to2011, checks the nonlinear relationship between large shareholder share ratio and cash holdings; then, based on the financing constraints group, further tests the relations of large shareholder control and cash holdings in different financing constraints group; Finally, using the establishment of investor protection index, tests investor protection’s influence to large shareholder control in different financing constraints group.Chapter6using financial data and market data of Chinese listed companies from2005to2010, checks the nonlinear relationship of large shareholder share ratio and value; then, based on the financing constraints group, on the basis of test the difference of large shareholder shareholding ratio and the value of cash holdings in financing constraints group, then, using establishment investor protection index, tests if the interaction effect of investor protection, large shareholder share ratio and cash holdings has influence to value of cash holdings in the different financing constraints group, Finally, using the specific management mechanisms such as ownership structure, board of directors governance, information disclosure, area governance environment, tests which measurements can effectively constraint large shareholder behavior, increase the value of cash holdings.Chapter7puts forward the corresponding policy suggestions, and points out the research limitations and future research direction based on summarizing the full text.This paper’s mainly research results are as follows:First, this article divides the sample into difference group according to the time and industry, the area, finds that cash holding level has significant different group. From time features, cash holdings presents the trend of first decline then up. In2008, the average of cash holdings reaches the lowest point15.538%. From industry features, communication and culture industry has the highest level of cash holdings, reaches30.691%, electric power, gas and water production and supply industry has the lowest cash holdings, reaches8.168%. From area features, GuiZhou has the highest cash holdings, reaches28.515%, JiLin has the lowest cash holdings, reaches8.893%.Second, we find the inverse "U" type relationship between large shareholder share ratio and cash holdings. When the share ratio of the largest shareholder is less than48%, there is a significant positive correlation between the share ratio of the largest shareholder and cash holdings; When the share ratio of-the largest shareholder is more than48%, there is significant negative correlation between the share ratio of the largest shareholder and cash holdings.Dividing the sample into constrain group and unconstrain group according to the mortgage asset scale and the multiple of interest safeguard, we find, when the share ratio of the largest shareholder is lower than48%, constraints group has more cash holdings than unconstrain group;when the share ratio of the largest shareholder is higher than48%, constraints group has lower cash holdings than unconstrain group. In order to test the influence of investor protection to large shareholder behavior, we first establish the investor protection index with the principal component analysis method, then find, when large shareholder share ratio is less than48%, improving the level of protection of investors will increase corporate cash holdings in constrain group and unconstrain group; When large shareholder share ratio is more than48%, improving the degree of protection of investors will reduce the cash holdings only in constrain group.Third, we find the "U" nonlinear relationship between large shareholders share ratio and value. When the first shareholder share ratio is less than46%, with the increase of the share ratio of large shareholder will reduce the value of cash holdings; When the share ratio of the largest shareholder is more than46%, with the increase of the share ratio will increase the value of cash holdings. In order to test the difference of the value of cash holdings of large shareholders controlling in the different financing constraints group, using mortgage assets scale and the multiple of interest safeguard as the standards of financing constraints, we find when the share ratio of the largest shareholder is less than46%, large shareholders’occupying behavior is more serious, there is lower marginal value of cash holdings in financing constraints; When the share ratio of the largest shareholder is more than46%, large shareholders will actively reduced cash holdings, there is the higher marginal value of cash holdings in financing constraints. In order to test the influence of investor protection to large shareholder control, we introduce interactive item of investor protection,large shareholder share ratio and cash holdings in the model,find three dimensional interactive item’s coefficients is significantly positive whatever share ratio of the largest shareholder is more than46%, which means improving the degree of investors protection will constraint large shareholder behavior, increase the marginal value of cash holdings. Further testing investor protection’s influence to the marginal value of cash holdings of large shareholder controlling in the different financing constraints group, we find improving the degree of investors protection would constrain large shareholder’s behavior only in financing constraints group, which may be the disposable cash of large shareholder is less in financing constraints group, improving the degree of investors protection can carry out effective supervision to large shareholders, to limit large shareholder’s behavior, increase the marginal value of cash holdings.Fourth, through testing the specific governance mechanism’s constraining function to large shareholder,this article finds when large shareholder share ratio is less than46%, improving the degree of ownership balance, increasing institution share ratio and the numbers of institution, the chairman of the board and CEO is different people, the standard unqualified audit opinion from accountants firm, employing the international four accounting firm, improving the market index, reducing government intervention to firm, improving the intermediary organization and legalization level, will increase the marginal value of cash holdings of large shareholders controlling; and increasing the size of the board, cross listing will reduce the marginal value of cash holdings of large shareholders controlling. When large shareholder share ratio is more than46%, increasing institution share ratio and the numbers of institution and the standard unqualified audit opinion from accountants firm can increase the marginal value of cash holdings of large shareholders controlling; and improving he degree of ownership balance as well as increasing external independent director’s share ratio will reduce the marginal value of cash holdings of large shareholders controlling.The main contributions of this paper are the following aspects:First, based on agency theory and financial constraint theory, this paper studies the relation of financing constraints, agency conflict of large shareholder and small shareholder, cash holdings and value effect, which avoids the limitation of previous scholars individual research financing constraints or agency conflict perspective, improve the cash holding’s theory research content, expand the cash holding theory research framework.Second, this paper researches not only the influence of large shareholder control to cash holdings and value effect, but also discusses the influence of the governance effect of investor protection to large shareholder control to cash holdings and value influence. And, in the study of the value of cash holdings, this paper discusses the governance measures which can restrain large shareholders occupy motive, so as to improve large shareholder control’s value effect of cash holdings.Third, based on the comprehensive consideration of the ownership structure of the board-of directors, management, information management, such as the area of the environment on the basis of governance mechanism, this paper uses principal component analysis to establish the investor protection index, the index’s establishment contributes to study the relation of investor protection and cash holdings and value effects from the overall level of investor protection, avoids the endogeneity problem between the variables. |
