Studies Of The Managerial Ability Impacts On Corporate Cash Holdings

Cash has always been one of the most important assets in enterprise operation,and cash holding strategy has also been an important business strategy of the company.The research on cash holdings is an important field that domestic and foreign scholars pay close attention to.Scholars at home and abroad have identified three motives for enterprises to hold cash:transaction motive,precautionary motive and speculative motive.However,the ultimate purpose of holding cash should be consistent with the overall strategy of the enterprise to maximize the value of the company.The concept of managerial ability comes from the organic integration of psychology,sociology and management.However,because it is difficult to measure the managerial ability,the managerial ability is not considered in the studies of cash holdings.The method of Dermerjian(2012)provides the possibility for the measurement of managerial ability.And in recent years,it has become a research hotspot in the academic circle.Managerial ability is a further extension of the characteristics of management background.Many scholars around the world have verified its influence on corporate decision-making(Bertrand and Scholar,2003),in-service consumption(Zhang Tiezhu and Shaman,2014),innovation level(Yao Lijie and Zhou Ying,2018),investment efficiency(Pan Qianjin and Wang Juncai,2015),etc.However,few scholars have studied the relationship between managerial ability and corporate cash holding strategy.Senior management is responsible for strategic and financial decisions,and the level of managerial ability will also have an impact on the cash holding.Based on this,this study takes China’s non-financial listed companies as samples to conduct an in-depth study on the relationship between management competence and cash holdings.First of all,this reseach uses Dermerjian’s research method for reference,using DEA method and Tobit model to measure the managerial ability of listed companies in China from 2010 to 2019.The statistical results show that there are obvious differences in the managerial ability between different listed companies.Further study found that managerial ability can positively affect cash holdings,that is to say,listed companies with high managerial ability tend to hold more cash.Secondly,this study builds a dynamic panel data model to test the relationship of managerial ability and the adjustment speed of cash holdings.It is found that the managerial ability has a significant positive impact on the dynamic adjustment speed of cash holdings,that is to say,the higher the managerial ability,the faster the dynamic adjustment speed of cash holdings.In addition,the study grouped the samples according to managerial ability.For the group with higher managerial ability,managerial ability has a greater impact on the dynamic adjustment speed of cash holdings,however,for the group with low managerial ability,managerial ability has little influence on the dynamic adjustment speed of cash holdings.The management with higher managerial ability makes the company’s cash holdings move closer to the optimal level by constantly narrowing the gap between the cash holding of the previous period and the target cash holding level of the current period.Thirdly,this paper studies whether there are differences in the impact of managerial ability on cash holdings of companies with different sizes.In this paper,a Panel Threshold Autoregressive Model with firm size as the threshold variable is constructed.The study found that there is a threshold effect on cash holdings.Changes in company size will affect the extent of managerial ability on cash holdings.With the increase of company size,the influence of managerial ability on cash holdings increases firstly and then decreases.In both larger and smaller companies,managerial ability has unconspicuous impact on cash holdings.However,in medium-sized companies,cash holdings are greatly affected by managerial ability.Finally,this paper improves the cash holding value model of Fama and French(1998).New model fully considers the influence of corporate characteristics,corporate governance and macro-economic factors.It is found that managerial ability has a significant positive effect on cash holding value.That is to say,the Higher the managerial ability,the higher the value of corporate cash holdings.This paper studies the relationship between managerial ability and cash holding and its adjustment speed,establishes the influence model of managerial ability on cash holding value innovatively,and it is the first time to find the threshold effect of managerial ability on cash holdings.This study expands the research field of managerial ability,enriches the research content of cash holdings,and has important significance for the application of organizational theory in the field of financial management and corporate strategy.