Research On The Influence Of Cash Holdings To The Enterprise Investment Behavior

Cash is the medium of commodity exchange, it has the value and use value, and atthe same time, cash holding can comprehensively reflect the enterprise’s managementand financial management strategy, these characteristics of cash holdings take a veryimportant position in the enterprise financial management. At the same time, cashholding as an important method of enterprise internal financing is closely related to theinvestment behavior. As the loom large of the problem of the agency and informationdissymmetry, how much cash holding the enterprise should keep becomes an importantproblem to the enterprise managements, so as the enterprise can make cash holding costsand lose opportunity of investment costs be minimum.This paper aims to study the differences in the investment behavior and the rationality,validity in the investment behavior in different enterprises who keep different cashholdings. First of all, in this paper, the cash holdings and investment behavior of theconcept is defined, and introduces the basic theory of cash holding research, a detailedanalysis the relationship of the cash holding and investment behavior. Secondly, this papergenerally analysis the present situation of cash holdings of Chinese public company,including industry characteristics and sequence characteristics of cash holdings, and thenwith the method of Opler et al (1999) analysis the expected level of the cash holdings ofpublic companies in China, and it is set to be a standard of high and low amount cashholdings that whether the actual cash holdings is behind the expected cash holdings or not,then fall all samples into high cash holdings group and low cash holdings group. Theempirical study found there is large difference between actual cash holdings and expectedcash holdings in Chinese public company, expected holdings in general higher than theactual holdings. Then, this paper empirical research the influence of the enterpriseinvestment behavior with different cash holdings, the empirical study found different cashholdings cause different influences to the enterprise investment behavior, as they haveenough cash, high cash holding enterprises pay more attention to both direct investmentand indirect investment; in the other hand low cash holdings enterprises, limited by thecash holdings, only pay attention to indirect investment. Finally, the business performanceas the standard, test the rationality of the investment behavior and effectiveness with the interactive variables of cash holdings and direct investment and indirect investmentinteraction. Empirical found enterprises, who keep the cash holdings higher, after theenterprises spend the cash for direct investment and indirect investment, the investmentbehavior promote the enterprise performances, that is effective and rational; and low cashholding enterprises, without the ability to direct investment, loss investment opportunity,underinvestment occur.