The Impact Of Investor Sentiment And Limited Arbitrage On Corporate Cash Holdings

Corporate cash holding is one of the core issues in enterprises financial management.In order to meet the demand of enterprises at the same time to ensure that cash holdings level,need to be considered in a wide range of complex factors.This paper considers the influence of investor sentiment and limited arbitrage on corporate cash holdings and puts forward some Suggestions.To study the relationship between investor sentiment,transaction cost,shorting costs,heterogeneous fluctuation and the enterprises cash holdings level,in this paper,first of all,should consider the theoretical basis of the analysis of research,including the basic theory of cash holdings and used to analyze business performance of the CAPM model and Fama-French three factor model.Secondly,the listed a-share market data and corresponding enterprises financial data from January 2009 to December 2018 were selected,and the problem data were reasonably excluded.Then,the market data proxy variables were used to construct the monthly investor sentiment index of the entire market through principal component analysis.Performance indicators were extracted by following CAPM model and fama-french three-factor model.By sorting the level of cash holdings,the portfolio is constructed,and the relationship between each factor and the cash holdings level is analyzed by double sorting.The results show that: when investors are depressed,the cash holding level of enterprises will increase,but the cash holding effect will be weakened;when investors are in high mood,the cash holding level of enterprises will decrease,but the cash holding effect will be strengthened.In addition,among stocks with low transaction cost,high short-selling cost and high characteristic volatility,the cash holding effect is strong,indicating that transaction cost will not only affect investors.Generally speaking,high cost and high risk will cause rational investors to give up certain arbitrage opportunities,and the reduction of arbitrage will improve the performance of enterprises.At the end of this article,a possible suggestion is put forward.