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Determinants of corporate cash holdings: An empirical study of Chinese listed firms

Ahmed, Rizwan; Qi, Wu; Ullah, Subhan; Kimani, Danson

Authors

Rizwan Ahmed

Wu Qi

Subhan Ullah

Danson Kimani



Abstract

This study explores the determinants of corporate cash holdings in the Chinese context. As one of the largest developing countries in the world, China offers an interesting opportunity to explore the role of corporate governance, and ownership structure in explaining corporate cash holdings. Owing to the unique economic problems in the developing and emerging economies, this study aims to investigate whether the research findings on developed countries could be generalized globally. Applying fixed-effects estimations on a sample of 115 Chinese firms listed between 2012 and 2016, we find that the level of corporate cash holdings has a significantly negative relationship with leverage, bank debt, non-cash liquid assets and managerial ownership. In particular, cash flow volatility, investment opportunity and dividend have a significantly positive relationship with cash holdings levels. These findings are consistent with the majority of the existing studies carried out in the Western context. We also find that firm size, cash flow, board independence and ownership concentration have a significant influence on the level of corporate cash holdings. Our study contributes to the finance literature and we offer new insights into the relationship between corporate governance and corporate cash holdings in the Chinese context. Some of the findings on the developed countries could be generalized to a wider context. Further, the unique relationship between corporate governance and cash holdings in the Chinese context provides empirical insights for further research.

Citation

Ahmed, R., Qi, W., Ullah, S., & Kimani, D. (2018). Determinants of corporate cash holdings: An empirical study of Chinese listed firms. Corporate Ownership and Control, 15(3), 57-65. https://doi.org/10.22495/cocv15i3art5

Journal Article Type Article
Acceptance Date Mar 17, 2018
Online Publication Date Mar 20, 2018
Publication Date 2018
Deposit Date Mar 8, 2018
Publicly Available Date Apr 24, 2018
Journal Corporate Ownership and Control
Print ISSN 1810-3057
Electronic ISSN 1727-9232
Publisher Virtus Interpress
Peer Reviewed Peer Reviewed
Volume 15
Issue 3
Pages 57-65
DOI https://doi.org/10.22495/cocv15i3art5
Keywords Cash holdings; Chinese listed firms; Trade-off theory; Pecking order theory; Free cash flow theory
Public URL https://hull-repository.worktribe.com/output/724324
Publisher URL https://www.virtusinterpress.org/-Corporate-Ownership-and-Control-.html

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