Abstract

One of the important features under Chinese socialist economic system is corporate governance. In terms of corporate governance, Chinese enterprises are divided into state－owned and non－state－owned enterprises. Chinese state－owned enterprises are enterprises in which the central or local government has a dominant influence. On the other hand, non－state－owned enterprises are those whose investors are operated and controlled by private individuals rather than the state. There may be differences in cash holding and incentives in several dimensions, such as the organizational environment, business operation, and government support of state－owned and non－state－owned enterprises. Therefore, it can be expected that the cash retention policy, which is an important factor in corporate decision－making, differs depending on the corporate governance structure. So far, there are few studies that have directly investigated the relationship between the corporate governance of Chinese companies and their cash holding policy. In order to analyze these factors, this study verified what kind of correlation exists between the type of corporate governance of Chinese companies and the cash holding policy. The summary of the analysis results of this study is as follows. First, the state－owned firms holding more cash inside the firm. Second, the state－owned enterprises as a slow adjustment by the state－owned company’s from the company’s actual cash holding level to the target cash holding level. As a result, the government controlled state－owned enterprises, holding more cash inside the enterprise and slowly adjusting it from the excessive cash holding level to the target cash holding level may be an act against the corporate value or to the interests of minority shareholders. It may have a negative impact, but it can be seen as a long－term decision to develop society and economy and increase social efficiency. In addition, state－owned enterprises with deficient cash reserves are believed to be attributable to the relationship between state－owned enterprises and state－owned commercial banks that the slow rate of adjustment of their cash reserves.

Keywords

• Corporate Governance
• Government
• State－owned enterprise
• Cash holding
• Target cash holding
• Speed of cash holding adjustment

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