The Empirical Research Of Factors Influencing Cash Holding Level Of Listed Company In China

Cash holding is one important behavior of finance management for companies. It comprehensively reflects strategies of finances and management of related companies, and has close bearings on companies' governance. In the classic textbook of finances Principles of Corporate Finance, Brealey and Myers point out that what factors determining cash holdings and negotiable securities is one of the ten unsolved problems in finances. The significance of carrying out research into this problem manifests itself in theory and practice. In theory, by means of extensive reading, the author summarizes mainstream theories about factors affecting cash holding level, and constructs a testing model based on the theories. In addition, the author conducts empirical research to test the feasibility of the theories in China which is different from foreign countries where the security market is mature and the watchdog committee is on duty. In practice, according to the analysis in the paper, the utilization efficiency of cash in China's listed companies is far lower than that in western developed countries. The purpose of the paper is to provide effective strategies in terms of managing cash for the management of listed companies and security supervision departments based on the analysis of factors affecting cash holding level.The paper carries out the research through the combination of empirical research and standardization research. Based on the large amount of literature at home and abroad and theoretical foundation about cash holding, namely, the model of transaction cost, theories about corporate governance and pecking order theory, the paper puts forward hypothesis for research and testing model in light of the current situation of China's listed company. Meanwhile, it tests the hypothesis by resort to analyzing the statistics of cash holding of listed companies in Shanghai and Shenzhen stock markets in 2002, 2003 and 2004. The research results demonstrate that the following factors have positive effects on cash holdings of listed companies: scale, future investment opportunities, amount and fluctuation of cash circulation, holding level of company management and the largest shareholder, whereas the following factors have negative effects: substitution of cash and capacity of liabilities.The present paper reviews comprehensively the factors influencing cash holdings of listed companies in China. Compared to the previous research, the paper is characterized by two points. Firstly, the research perspective is relatively overall. It constructs the testing model based on three aspects: the model of transaction cost, the pecking order theory and management theories of companies to survey factors affecting cash holdings of listed companies in China. Secondly, the statistics and samples chosen for research purpose are a lot more through many more years.