Heterogeneity Of Debt Sources And The Level Of Corporate Excess Cash Holdings

Cash holdings play a crucial role in financial decisions,as they affect not only investment and financing activities,but also the ability of firms to continue operations.However,excessive or insufficient cash reserves can have negative consequences for enterprises.Excessive cash reserves can increase opportunity costs and the risk of cash misuse;insufficient cash reserves can expose enterprises to financial distress or even bankruptcy.How to determine the optimal level of cash holding without reducing the efficiency of capital utilization has always been a practical problem for enterprises.As an important external governance mechanism,debt financing can facilitate creditors’ participation in corporate governance and thus influence the cash holdings of firms.The theory of debt heterogeneity is developed based on the diversification of debt financing,and the structure of debt sources is more intrinsically intrinsic to the theory and practice than the size and maturity structure of debt.However,few studies have examined the impact of debt source heterogeneity on firm excess cash holdings.This paper analyzes its impact on excess cash holdings from the perspectives of debt governance theory based on the governance mechanism of debt heterogeneity,reputation theory and agency theory.Firstly,the Shanghai and Shenzhen listed enterprises from 2009 to 2021 were selected as the sample group,and the impact of heterogeneity of debt sources on excess cash holdings was verified,and whether agency costs were the role path.Secondly,it explores the impact of product market competition and institutional investors’ shareholding on the relationship between the two.Furthermore,the paper examines how excess cash holdings affect corporate sustainability.This paper finds that debt source heterogeneity significantly reduces firm excess cash holdings,and this result remains robust after various sensitivity tests such as using alternative measures;reducing agency costs is one of the channels through which debt heterogeneity affects excess cash holdings;the negative effect of debt heterogeneity on excess cash holdings is more pronounced when product market competition is low or institutional ownership is low;excess cash holdings reduce corporate sustainability,while debt heterogeneity can mitigate this negative effect.Based on these findings,this paper provides some policy implications for government regulators and enterprise managers.