| Free cash Flow is the most important financial resources for the enterprise daily operating activities. Free cash Flow holdings effect the investment and financing problems directly, it has an important impact on business performance, reflect the profits quality and the overall value of the company. Therefore, the cash Flow holdings need to be maintained at an appropriate level. But according to Jensen’s Free cash Flow hypothesis, holding too much FCF will lead to the serious agency costs problem and damage the value of the company. So we ought to be find the balance point in free cash Flow for the company to produce the positive and negative effects as the optimal holdings of free cash Flow.Free cash Flow come from the operation of the company. As the basis enterprise operation mechanism, the company corporate governance have the positive or negative impact on the free cash Flow holdings. On the whole, effective corporate governance will resist the free cash Flow holdings in a certain extent. The extent can avoid excessive investment consumption and idle capital problem which due to the too much cash Flow.This paper is based on the relationship of corporate governance and free cash Flow holdings, choosing six indicators under the two dimensions of ownership structure and board characteristics. As our country the 1316 A listed companies on the 2010-2012 years of date as samples, this paper results show that the proportion of controlling shareholder holdings, the proportion of institutional investors holdings are positively correlated with the free cash Flow holdings. The proportion of managerial shareholders holdings, the duality of chairman of the board and general manager was negatively correlated with the free cash Flow holdings. The size of the board and board independence don’t have significant relationship with the free cash Flow holdings. Based on the empirical results, putting forward to suggestions for perfecting our corporate governance mechanism and corporate governance environment. |
