Financing Constraints, Empirical Research Motivation And Level Of Cash Holdings

Cash holdings policy is an important company’s financial decisions. It not onlyreflects the company’s overall financial and business strategy, closely relates tomacro-institutional environment and economic consequences of cash holdings.Investors are most concerned that the economic consequence of cash holdings is the"value creation" or "value destruction”. Compared with western scholars’researchingon this Problem，there is few studies on cash holdings issue in depth and multi-angle.There is already a high level of cash holdings in listed companies of China, onlynon-financial listed companies and non-listed insurance company, from2007to2012years, the average net cash and cash equivalents amounted to company net assetsreached around27%. Compared with other assets, cash assets does not bring enoughvalue to the enterprise, then, the problem comes up: Which factors and motivations leadto so much cash held in the company of China? How this motivation of cash holdings isperforming? Keynes (1936) thought the motivation of transaction and precaution is themain reason of cash holding, and this paper will discuss the different performance of themotivation of transaction and precaution in different degree of restraint and cashholding level.This Paper sets up the comprehensive index sign to measure the degree of financialConstrains of the list companies, based on comprehended the concept of financialconstrains thoroughly; After reviewing and tiding up all the effects of the theories ofcash holdings, carries on the effects of financial constrains theory to cash holding. Onthe aspect of empirical study this paper collects the Panel Danas of1449listedcompanies in the Stocks of shanghai and Shenzhen during the2007-2012Period, takingthe cash holdings of listed companies as dependent, based on categorizing the listedcompanies according to the comprehensive. Index sign of financial constraints,investigates the effects of the degree of financial constrains to the cash holdings of ourlisted companies, through all kinds of statistics, and the performance of motivation ofcash holdings under different levels of financing constraints.The results reveal that:(1) Compared to non-financial constraints companies, financing constraintscompanies have higher levels of cash;(2) There is a remarkable positive relationship between cash holding and cashflowing volatility in financial constraints companies;(3) Precautionary motive of cash holdings in financing constraints companies isstronger than non-financial constraints companies; (4) Financing constraints company cash holdings of the precautionary motivationstronger than its transaction motivated.Regardless of what way to classify, China’s listed firms face financing constraintsor not. Will directly impact on its performance of the motivation of cash holdings.Thisarticle enriches financing constraint’s empirical evidence according to cash holdingsand its economic consequences.