Research On The Influence Of Cash Holdings On Investment Spending Of Listed Companies

Cash is an important financial resource of companies, not only it can flow freely, but also it is high liquidity and low profitability. Cash as a significant means of financing for companies, is closely related with investment decision, capital structure, performance and governance. Too much or too less cash both is not good. The subject of cash holdings is worth researching. The main purpose of this paper is try to find out the main influencing factors of cash holdings of the listed companies in China, and the influence of investment spending in different level of cash holding.Firstly, the paper expatiates the current situation of cash holdings study in China and overseas, then defines the concept about cash, cash holdings and investment spending, reviews the present theories of cash holding, summarizes present studies. Based on these theories, it analyses the influencing factors of cash holdings, the relationship between cash holdings and investment spending, proposes the hypothesis. Secondly, the paper selects listed companies in manufacturing industry during 2012-2014 as sample data, combined with the financial characteristics and the governance structure, constructs the model of determination of cash holdings, finds the significant influencing factors of cash holdings, and determines the target cash holdings. Finally, taking the actual cash holdings and target cash holdings residual as the standard, separates all samples into two groups which are excess cash holdings and low cash holdings, cash flow, investment opportunities, excess cash holdings as the independent variable, investment spending as the dependent variable, designs study model to analysis the influence of investment spending in different level of cash holdings.The result is company size, cash flow, investment opportunities is significant positively related to cash holdings; financial leverage, cash replacement is significant negatively related to cash holdings; dividend payment, shareholder protection degree, management shareholding ratio is not significant related to cash holdings. And there is a difference between actual cash holdings and target cash holdings; Companies with different cash holdings, investment spending is also different, there is a positive correlation between the two, that is:The more cash holdings, the more investment spending, investment spending increases with the increase of cash holdings, the viewpoint of trade-off theory and pecking order theory are verified. Management is more inclined to use excess cash on the beneficial projects to develop the companies, just not to pursue the interests of management themselves.