TITLE:
Corporate Governance, Financial Constraint, and Value of Cash Holdings: Research from the Perspective of Ultimate Controllers
AUTHORS:
Weibin Zhao
KEYWORDS:
Ultimate Controller, Government Control, Value of Cash Holdings, Corporate Governance, Financial Constraint
JOURNAL NAME:
Modern Economy,
Vol.7 No.10,
September
14,
2016
ABSTRACT: This paper takes into
consideration the character of China as an emerging market and distinguishes between the ultimate-controller
trait of the central government and the
local government. This paper conducts the analysis using the corporate
governance and financial character perspectives, based on agency theory and
financial constraint theory. The findings
show that corporate governance is the main reason for values of cash
holdings of SOEs are lower than those of private firms. Moreover, values of cash
holdings of SOEs controlled by the central government are higher than those of
cash holdings of firms controlled by local governments. The difference could be
attributed to the observation that central government-controlled SOEs have
better governance and investment
opportunities compared with the local government-controlled ones. The objectives
of this paper are to determine the factors influencing the difference between cash holdings of state-owned enterprises (SOEs)
and private firms, and to analyze the influence of governments at
different levels on value of cash holdings of SOEs in China. Results of the
analysis are expected to aid in understanding of how corporate governance and
financial constraint affect value of cash holdings of firms.