An Empirical Research On The Value Of Cash Holdings For Listed Companies In China

The economic consequences of holding cash is a problem that still hasn't been resolved in the field of finance, scholars mainly do research from the perspective of information asymmetry theory and agency theory. The economic consequences of holding cash, concretely speaking, means the increase of the value of shareholders for every increase of 1 yuan, that is, the marginal value of cash holdings.In recent decades, researches about cash holdings have become a hot issue of overseas academics.This is a problem which has been widely studied by foreign scholars.It is relatively late that this problem being studied in our country, domestic financial scholars have paid more attention on the factors that influence the amount of cash holding and the motivation of holding cash, now there are not many articles on the economic consequences of holding cash.In this dissertation, we intend to research the value of cash holdings for Chinese listed companies, with the background of companies holding excess cash.We take the A-share listed companies in shanghai and Shenzhen capital markets during 2005-2009 as samples to research the marginal value of cash of Chinese listed firms empirically. We found that agency theory is more suitable to explain this phenomenon. A further study from the perspective of dual-agent conflicts showed that the agent conflict between managers and shareholders doesn't affect the value of cash,while the agent conflict between ultimate shareholders and minority shareholders is the primary cause of discount on cash holdings. What's more, the agent conflict in state-owned holding companies is more severe.We found that:(1) The average marginal value of cash holdings of Chinese listed firms is 0.767yuan, this obvious discount of cash holdings suggested that the agent cost of holding cash exceeds the benefit, so agency theory is more suitable to explain this phenomenon. The marginal value of cash holdings of state-owned holding companies is 0.750yuan,significantly lower than that of non-state-owned enterprises (1.056yuan),suggesting that the agency problem of state-owned enterprises is more severe, so the cash utilization efficiency is lower. (2) A further study from the perspective of dual-agent conflicts showed that the agent conflict between managers and shareholders doesn't affect the value of cash,while the agent conflict between ultimate shareholders and minority shareholders is the primary cause of discount on cash holdings. (3) For companies with cash flow rights not equal to the control rights, the marginal value of cash holdings is 0.527yuan,while it is 0.836 for companies with the cash flow rights equal to the control rights, so ultimate controlling shareholders have the motivation of encroaching the interests of minority shareholders,with the approach of using pyramid-controlling structure or cross-shareholding to separate the cash flow rights and control rights. (4) For companies with cash flow rights not equal to the control rights,while the ultimate shareholders are state-owned shareholders, the value of cash is 0.325yuan,and it's 1.150yuan for non-state-owned holding companies. So the agent conflict between ultimate shareholders and minority shareholders is more severe in state-owned holding companies.(5) Cash flow rights held by the ultimate shareholders have a significant negative correlation with corporate marginal cash value, so the research achievements on cash flow rights by foreign scholars are not fit for our country.For Chinese corporates, cash flow rights held by the ultimate shareholders cannot bring forth the "incentive effect", but the "tunneling effect". Many research achievements made by foreign scholars are not suitable for our country.Security market of China is still in the transition period of economic, the capital markets are still not perfect, with the severe phenomenon of internal or key people control, and also the investing and financing channels are still not sound, there are many irrational factors that influence the decisions made by the investors. Therefore, many research achievement made by foreign scholars are not suitable for our country.Research conclusions about the value of cash holdings enrich cash holdings theory in our country from a new perspective, and also present empirical evidences on the existence of the ultimate shareholders'profit invasion behavior from the angle of cash holdings.