The Impact Of The Ownership Structure On Excess Cash Holdings

Cash holding policy is an important financial management behavior. It is not onlyrelated to business management and development, but also closely related to thecorporate governance. Excess cash holdings is an excessive value beyond the normalcash holdings which is determined by the characteristics of the companies. The rootcause of excess cash holdings is agency problem, and the existence of excess cashholdings reflects the governance mechanism’s deficiency. As the basis of corporategovernance, ownership structure is absolutely related to excess cash holdings. After splitshare structure reform, listed companies’ ownership structure and corporate governancepresent new features. How do the new features influence on excess cash holdings? Whatkind of effect on excess cash holdings will be produced by the new features? The studyresearches the impact of ownership structure on excess cash holdings after shareflotation reform to provide theoretical basis and empirical evidence for the effectivenessof share flotation reform and further optimization of ownership structure.Based on the background of the finish of split share structure reform, changes inownership structure of listed companies and their influence on corporate governance areanalyzed, and the root cause of excess cash holdings is explained as well. On this basis,the listed company data from2007to2009is gathered to research the impact ofownership structure on excess cash holdings. The empirical results show that split sharestructure reform is effective, the ownership concentration and the proportion of tradableshares are negatively correlated with excess cash holdings; if the largest shareholder isstate-owned, excess cash holdings can be significantly reduced; managerial ownershipis helpful to form the common interest between managers and shareholders and reduceexcess cash holdings; there is a negative relationship between balance of ownership andexcess cash holdings, but in the case of too much cash holdings, this relationship has notbeen verified. Finally, based on the theoretical analysis and empirical findings, relativesuggestions are put forward to optimize ownership structure and reduce excess cashholdings.