Growth, Product Market Competition and Cash Holdings-Empirical Evidence from Chinese Listed Companies

Abstract

Abstract: Industry environment and the corporate growth capability and competition can significantly affect the value effect of cash holdings, this paper investigates the value of cash holdings effect by using Shanghai and Shenzhen A shares in 2003-2013 annual data of listed companies, combined with the corporate and industrial growth capability and competition under the endowment difference (financing constraints and the nature of property rights). The study shows that:corporate cash holdings has significant value effect, competition can promote the value effect of cash holdings by weakening the information asymmetry and inhibiting agency problem; high-growth (corporate growth and industrial growth) can promote the value effect of cash holdings, and the promoting effect is more significant in non-state-owned companies of higher financing constraints than others; Product market competition is the critical path which high-growth promotes value effect of cash holdings, high-growth (corporate growth and industrial growth) promotes the value effect of cash holdings by enhancing the degree of competition (corporate competition and industrial competition).

Key words: cash holdings, growth, product market competition, endowment difference

CLC Number:

F275.1

WU Hao-min, HAN Jian-qiang, LI Wan-li. Growth, Product Market Competition and Cash Holdings-Empirical Evidence from Chinese Listed Companies[J]. , 2016(02): 51-61.

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