Research on the Influencing Factors of Cash Holdings of Listed Companies —Based on the Perspective of Dual Principal-Agent Theory

From the perspective of dual principal-agent theory, this paper takes the panel data of A-shares in China from 2012 to 2019 as the research object, uses fixed-effect model to empirically analyze the influencing factors of cash holdings of listed companies from three aspects: ownership structure, board characteristics and quality of internal control information disclosure. At the same time, the empirical results are explained theoretically. The research in this paper is of positive significance to the cash holding management of listed companies in China.


Introduction
In the perfect capital market, the complete symmetry of information, no transaction cost and no friction in the market make it easy for a company to solve the financial dilemma by raising insufficient funds with expected internal cost. But strict assumptions, such as that investors, are perfectly rational, make perfect capital markets impossible in reality. Therefore, in the imperfect capital market, cash has become an important means to solve the company's financial difficulties due to its high liquidity, and holding cash to cope with the company's daily operation and investment activities has also become an important part of the company's financial decisions.
In view of cash holding, scholars have put forward trade-off theory, financing priority theory and principal-agent theory. Baumol (1952), Miller & orr (1966), Karus & litzenberger (1973), etc. put forward the trade-off theory, which holds that the best level of cash holding can be obtained by weighing the cost and income of cash holding. Myers & Majluf et al. (1984) put forward the theory of financing priority. Companies have a preference for financing channels. The financing order of companies is shown as endogenous financing, debt financing and equity financing. This is mainly due to the information asymmetry caused by the imperfection of the capital market, which forces investors to underestimate the company's securities and increases the company's cash cost, thus increasing the company's external financing cost. Therefore, there is no optimal level of cash holding. The company's cash holding is only a function of the company's investment and financing decisions and profitability.
The trade-off theory and the financing priority theory both focus on the influence of the internal financial characteristics of the enterprise on the cash holdings. They think that the goal of the company is to maximize the value of shareholders, thus ignoring the relevant interests of the management. In this context, the principal-agent theory came into being, focusing on the determinants of cash holding from a new perspective. According to the principal-agent theory, the maximization of shareholder value is in conflict with the maximization of management's own interests. At the same time, the separation of ownership and management makes the management unable to fully control the residual income. Therefore, in order to be able to carry out in-service consumption, obtain welfare allowance, acquire and build an empire through mergers and acquisitions, make inefficient investment and evade the supervision of external capital market, the management tends to hold easily manipulated cash to gain their own interests at the expense of shareholders. This is the first type of agency conflict. On the other hand, in the case of equity concentration, the interests of controlling shareholders and minority shareholders are deviated, and the controlling shareholders will transfer a large amount of corporate resources by holding cash to gain control rights and harm the interests of minority shareholders, which is the second type of agency conflict. Both types of agency conflicts make the company's cash holding level higher than normal, reducing the value of cash holding. Therefore, the analysis of the determinants of cash holdings in this paper is mainly based on the dual principal-agent theory.

Literature and Hypothesis Development
My research focuses on the influencing factors of cash holdings of listed companies in China, so in this section I will discuss prior literature related to these areas and detail the key hypothesis to be tested. In Sections 2.1 to 2.3, we discuss the relationship between equity structure, board characteristics and the quality of internal control information disclosure and cash holdings. As for whether the hypothesis is correct or not, we will test it in Section 3 by using the fixed-effect model to empirically analyze the relevant panel data. easy to make the private will rise to the will of the company, so the controlling shareholder may combine with its related parties to borrow the company's funds for compensation or free, hold cash instead of the company's dividend distribution, misappropriate the company's assets with the help of the advantage of insider trading information, and damage the interests of small and medium shareholders, that is to say, there is a profit grabbing effect of large shareholder's holding. From the perspective of corporate governance, Zhang Yuchun (2009) empirically obtains a significant positive correlation between the concentration of equity and the company's cash holdings.
In addition, when the proportion of large shareholders is high, the income from supervision is higher than the cost of supervision. As a rational economic person, large shareholders will be able to supervise the management's cash holding self-interest motivation, so as to reduce the agency conflict between management and shareholders, and then reduce the company's cash holding. At the same time, when the shareholding ratio of the controlling shareholders reaches a certain level, the proportion of the earnings of the controlling shareholders from minority shareholders in the total earnings decreases, and the cost of grabbing increases. At this time, the interests of controlling shareholders and small and medium-sized shareholders tend to be consistent, and controlling shareholders tend to reduce the amount of cash holdings of the company, which is the convergence effect of interest incentive of large shareholders . Wu Jin (2008) pointed out that as the first largest shareholder can actively supervise the management, the shareholding ratio of the first largest shareholder is negatively related to the cash holding level of the enterprise ;Wu Xiaoling et al. (2012) proposed that under the improvement of the governance mechanism of China's listed companies, the incentive effect of the large shareholder's shareholding is enhanced, which tends to reduce the company's cash holding in the company's financial decision-making.
Some scholars also proposed that the relationship between the first largest shareholder's shareholding ratio and cash holding is non-linear. For example, Han Zhongxue and Zhou Tingting (2008) proved that the relationship between the first largest shareholder's shareholding ratio and the company's cash holding is cubic curve. This paper also supports the non-linear relationship between the two. The specific situation is that the shareholding of the largest shareholder is Therefore, this paper proposes the following assumptions: Hypothesis 1: there is an inverted u-shaped nonlinear relationship between the shareholding ratio of the largest shareholder and cash holdings. Bai Chongen et al. (2005) found through empirical analysis that the higher the shareholding ratio of other major shareholders, the greater the improvement of internal agency conflict, and the higher the market value of the company.

Other Major Shareholder Shareholdings and Cash Holdings
Therefore, other major shareholders can effectively improve the internal agency conflict and reduce the company's cash holdings by supervising and checking the behaviors of controlling shareholders that damage the interests of other shareholders in pursuit of private interests. At the same time, the increase of the shareholding ratio of other major shareholders will also help more shareholders to participate in the company's operation and management decisions, effectively restrain the opportunistic behavior of insiders, and reduce the total amount of cash held by the management to maximize their own interests.
However, in addition to the role of supervision and balance, other major shareholders may conspire with controlling shareholders to deprive the interests of small and medium shareholders. These large shareholders embezzle the company's wealth by holding a large amount of cash, and at the same time, they use the internal capital to finance, so as to avoid the supervision from the external capital market. Wu Jin (2008) pointed out that under the condition that other conditions remain unchanged, the shareholding ratio of the top ten shareholders has a positive correlation with the cash holding level of the enterprise. Therefore, this paper proposes the following assumptions: Hypothesis 2A: there is a positive correlation between the shareholding ratio of other major shareholders and cash holdings.
Hypothesis 2B: there is a negative correlation between the shareholding ratio of other major shareholders and cash holdings.

Management Shareholding and Cash Holdings
Under the modern company system, the ownership and management rights are separated, and there is a conflict of interest between shareholders and the management, which makes the management give priority to their own private interests when making financial decisions in the operation of the company. In the cash holding decision, the management tends to hold more cash, mainly for the encounter, but also replace external financing with cash to avoid supervision from the external capital market. In addition, sufficient cash can also improve the risk-taking ability of the company; finally, the management also tends to hold cash for investment, expand the size of the company, so as to obtain high returns. Therefore, in order to alleviate the management's cash holding preference, the company will often make the management hold the company's shares and reduce the agency conflict between them (Jensen & Mekling, 1976). However, when the management's shareholding reaches a certain proportion, its ability to resist external pressure will be improved, and it is difficult for external shareholders to effectively supervise various financial decision-making behaviors of the management. At this point, the management will sacrifice the interests of shareholders to seek private interests.
Based on the analysis, this paper holds that the relationship between the proportion of management holding and cash holding should be non-linear. In the early stage of shareholding, the management lacks sufficient ability to avoid the supervision from external shareholders. The management's shareholding is more in line with the interests of the company's shareholders and reduces the amount of cash holdings. However, once the management's shareholding ratio reaches a considerable level, the management will be able to seek private interests by increasing the company's cash holdings, Such as on-the-job consumption, obtaining welfare allowance and building an empire. Therefore, the following assumptions are proposed: Hypothesis 3: there is a U-shaped non-linear relationship between the management's shareholding ratio and cash holdings.

State-Owned Shares and Cash Holdings
China's special economic system forms a special holding structure of the company, many companies have the phenomenon of "one share dominates". A few scholars believe that state-owned shares can play the positive role of major shareholders, effectively supervise the management of the company and reduce the cash holdings of the management. For example , Yu Dongzhi et al. (2006) and Zhang Xulei et al. (2007) concluded through empirical analysis that the proportion of state-owned shares is negatively correlated with cash holdings.
However, more scholars tend to believe that state-owned shares will increase the cash holdings of companies, mainly for the following reasons: Firstly, the phenomenon of "owner absence" often exists in state-owned holding companies, which leads to the lack of effective supervision mechanism and the inability to supervise the management's operation decision-making behavior. Therefore, the management has more opportunities to carry out on-the-job consumption by holding a large amount of cash, or to invest in projects with negative net present C. L. Lin DOI: 10.4236/jss.2020.86028 374 Open Journal of Social Sciences value in order to build an empire; Secondly, the goal of state-owned shareholders is not limited to the maximization of value, but must also take into account the social and political interests, thus resulting in the company's internal cash resources cannot achieve the optimal allocation; Finally, the special political background of state-owned shareholders makes it difficult for other shareholders to form an effective supervision and balance mechanism. Shi Minchao (2010) believed that the absence of the main body of state-owned shares and the omission of acting shareholders provided opportunities for the self-interest of the management, thus increasing the company's cash holdings. This paper supports the latter and proposes the following assumptions: Hypothesis 4: there is a significant positive correlation between the proportion of state-owned shares and cash holdings.

Board Characteristics and Cash Holdings
Under the background of the separation of ownership and management rights, the board of directors becomes a bridge linking ownership and management rights. Board members participate in the company's operation decisions through their own prestige and ability, and supervise the behavior of the management according to the overall interests of the company. Thus, the characteristics of the board of directors have an impact on the company's cash holding decisions.
Next, we will specifically analyze the relationship between the characteristics of the board of directors and cash holdings.

Board Size and Cash Holdings
As an important feature of the board of directors, the size of the board of directors not only reflects its ability to participate in the company's business decisions, but also reflects the quality of its supervision over the management. Kusnadi (2003) pointed out that the large scale of the board of directors would lead to the inefficiency of decision-making. Xu Xinhua and Wang Yihong (2012) believe that the larger the board of directors is, the more complex the structure is and the less efficient it is. That is to say, the large number of employees will lead to communication and coordination difficulties among members, the ineffective supervision function of the board of directors, and the inability to effectively supervise the management, and the management's self-interest motive will be stronger, the agency conflict between the management and shareholders will be more serious, and the company will retain more cash. However, some scholars, such as Zhang Dunli and Wang Zhe (2016), pointed out that the larger the board of directors, the more representative it is. Because the members of the board of directors have their own professional knowledge and work experience, they can learn from each other and make up for the shortcomings, so as to better play the role of the board of directors in the supervision of the management and reduce the excessive cash held by the management due to self-interest motivation.
Therefore, we propose the following assumptions: Hypothesis 5A: there is a positive correlation between board size and cash Hypothesis 5B: there is a negative correlation between board size and cash holdings. consumption and over investment easier, but also makes the chairman who is also the general manager unable to solve the long-term or short-term financial decision-making in a timely manner. Therefore, the combination of chairman and general manager is difficult to make the company reach the optimal state. Therefore, we propose the following assumptions:

Two-Job Combination and Cash Holdings
Hypothesis 6: there is a positive correlation between the combination of chairman and general manager and cash holdings. independent directors, the more can alleviate the two kinds of agency problems, promote the company to make wise business decisions and reduce the amount of cash holdings. Borokhovich et al. (1996) found that most independent directors come from outside the company. In order to make a difference, these ceos tend to propose countermeasures against the former ceos' failure policies, so as to highlight their own value. Zhang Dunli and Wang Zhe (2016)  shows that the independent director effectively supervises the opportunistic behavior of the management, and the independent director system in China is gradually improved. Therefore, this paper proposes the following hypothesis:

Proportion of Independent Directors and Cash Holdings
Hypothesis 7: the proportion of independent directors is negatively correlated with cash holdings.

Quality of Internal Control Information Disclosure and Cash Holdings
The disclosure of internal control information is the self-evaluation information of the design and execution effectiveness of internal control regularly provided by the company to external investors, and it is also an important channel for the company's stakeholders to supervise the internal control of the company. Effective internal control information disclosure is helpful to alleviate two kinds of agency conflicts within the company. First, the disclosure of internal control information has the function of supervision and evaluation. By checking the internal control evaluation report of the management, the shareholders find the defects in the internal control system, so as to monitor the self-interested behavior of the management and prevent the management from holding cash because of in-service consumption, excessive investment and empire building. Second, the internal control information disclosure has the function of signal transmission. In the imperfect capital market, information asymmetry exists, and the information possessed by major shareholders and minority shareholders is different. Therefore, the large shareholders with more information can make use of the information advantage to harm the interests of the small shareholders with less information. For example, in companies with poor quality of internal control information disclosure, it provides convenience for major shareholders to "hollow out" the interests of minority shareholders by fabricating the information disclosed by the company. Xu Xinxia and Wang Xuejun (2007) pointed out that internal control is an effective way for controlling shareholders to carry out infringement. Therefore, the disclosure of high-quality internal control information can effectively restrain the management and major shareholders to hold cash for self-interested motives. Therefore, this paper proposes the following hypothesis: Hypothesis 8: the quality of internal control information disclosure is nega-

Sample Selection and Data Source
This

Variable Definition and Model Construction
The variable definitions are shown in Table 1 where, subscripts i and t refer to the company and year respectively, and CASH1 i,t and CASH2 i,t refer to the measurement of cash holdings by two different methods respectively, X it is the equity structure, characteristics of the board of directors and the quality of disclosure of internal control information that have an impact on cash holdings. XSQ i,t is the sum of squares when X i,t is the shareholding ratio of the largest shareholder or the shareholding ratio of the management, α i represents firm fixed effect, ŋ t represents time effect, and ε i,t represents residual term.  CASH2. Therefore, it is necessary to take both into account to investigate the influencing factors of cash holdings to ensure the accuracy of the results. The average value of CASH1 and CASH2 is 16% and 21% respectively, which indicates that Chinese companies have more cash holdings. The shareholding ratio of the first largest shareholder ranges from 10% to 75%, and the standard deviation is 0.14, which indicates that there is a great difference in the concentration of equity among companies. The average shareholding ratio of management reaches 10%, which indicates that Chinese companies gradually pay attention to the incentive measures for management. The average value of state-owned shares is 3%, which is relatively low, which shows that the situation of "one share domi-

Regression Analysis of Ownership Structure and Cash Holdings
According to the regression results in Table 3, whether cash holding is measured by CASH1 or CASH2, the results show that: 1) The relationship between the shareholding ratio of the largest shareholder and cash holdings is inverted U-shaped. The shareholding ratio coefficient of the largest shareholder is positive, and the square term is negative. Hypothesis 1 holds. Taking the regression results of CASH1 to measure cash holding as an example, the coefficient of the largest shareholder's shareholding ratio and its square term are 0.237 and −0.141 respectively, which are significant at the significant level of 1% and 5% respectively. According to the value of the regression coefficient, the critical value of the shareholding ratio of the largest shareholder is calculated to be 84.04%. At     . When the shareholding ratio of the management is lower than 9.47%, the management does not have enough ability to avoid the supervision from external shareholders, and the management, in line with the interests of the shareholders of the company, will reduce the cash holding. Once management's shareholding exceeds 9.47%, management will be able to seek personal gain by increasing the company's cash holdings; 4) As can be seen from the columns of results 4 and 8, the proportion coefficient of state-owned shares is 0.045 and 0.076 respectively, both of which are significantly positive at the 1% level, indicating that the phenomenon of "owner absence" of state-owned shares and the political background strengthen the two kinds of agency conflicts of the company and increase the cash holding. Therefore, hypothesis 4 is established. At the same time, it can be seen that each control variable has statistical significance in the regression results, which verifies the selection of model specification. 2) It can be seen from the columns of result 3 and result 6 that the coefficient of dummy variable indicating whether the chairman and the general manager are two in one are 0.014 and 0.025 respectively, which are statistically significant positive at the significant level of 1%. This is consistent with our hypothesis 6. The combination of the two posts means that the general manager has no supervision, avoids many institutional constraints, and increases the individual's control rights and opportunities, which leads to the low efficiency of the company's internal governance  Note: t test values are in brackets, *, ** and *** represent significance levels of 10%, 5% and 1%, respectively. and the serious phenomenon of insider control; 3) The proportion of independent directors is negatively correlated with cash holdings. However, whether cash holdings are measured by CASH1 or CASH2, the proportion of independent directors has not passed the significance test, and hypothesis 7 is not valid.

Regression Analysis of Board Characteristics and Cash Holdings
This may be because under the specific background of China, the independent director system in some listed companies is just a virtual system, and the independent director has not played its due supervisory role, thus unable to restrain the opportunistic behavior of the management.  disclosure and cash holdings. When cash holdings are measured by CASH1 and CASH2 respectively, we can find that the regression coefficients of the quality of internal control information disclosure are −0.017 and −0.029 respectively, and both are significantly negative at the 1% significance level, which indicates that the higher the quality of internal control information disclosure, the less the cash holdings of the company. Hypothesis 8 holds. Internal control information disclosure effectively alleviates two kinds of principal-agent conflicts between management and shareholders, large shareholders and small shareholders through the role of supervision and evaluation and signal transmission.

Conclusion and Enlightenment
This is a significant negative correlation between the quality of internal control information disclosure and cash holdings; independent directors have a negative correlation with cash holdings, but there is no significant relationship between them.
The conclusion of this paper has important enlightenment in practice. Firstly, there is a non-linear relationship between the shareholding ratio of the first largest shareholder and that of the management and the cash holdings, so there is an optimal shareholding ratio, which needs to be explored in corporate governance. Secondly, it is worth noting that it is not that the higher the shareholding ratio of other major shareholders other than the controlling shareholders, the better the effect of checks and balances on the controlling shareholders.
Small and medium-sized shareholders still need to be alert to collusion tendency among large shareholders. At the same time, the phenomenon that state-owned shares are dominant in some enterprises is still a problem to be solved. Based on this, it is imperative to encourage private investors to participate in the stock market, promote the reform of share structure and optimize the share structure.
Moreover, most of the variables reflecting the characteristics of the board of directors contribute to the cash holding behavior in the company, and the board of directors does not play its supervisory function. Therefore, it is necessary for Chinese listed companies to further improve the system of the board of directors and carry out targeted rectification of the board of directors. At the same time, independent directors do not play an effective role in China's listed companies.
Finally, the improvement of the quality of internal control information disclosure can effectively alleviate the problem of dual agency conflict. Therefore, the company can improve the internal control information disclosure quality by improving the internal control awareness of internal personnel, establishing and improving the internal audit supervision system, and the regulatory department can develop a unified internal control evaluation standard.

Conflicts of Interest
The author declares no conflicts of interest regarding the publication of this paper.