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《Chinese Journal of Management Science》 2015-01
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Cash Holdings Smooth Investment:Base on the Perspective of Financial Constraints

LIU Duan;PENG Yuan;LUO Yong;ZHOU You-de;CHEN Shou;School of Business Administration,Hunan University;  
Firm's investment expenditure changes frequently because both internal and external financing are volatile,which will cause high adjustment costs.Therefore,firms should maintain stable investment expenditure.The effect that cash holdings have on firm's investment expenditure is considered in this paper.Based on the panel data of the listed companies in China A share market from 1998 to 2010,using the dynamic investment model with convex adjustment costs,the smoothing effect that cash holdings have on firm's investment expenditure in the total sample firstly is examined.Then,from the perspective of financing constraints,the differences of the smoothing effect are further analyzed under the different levels of financing constraints through group regression.It is found that cash holdings have a significant smoothing effect on firm's investment expenditure,and this effect is more pronounced when firms being financial constraints.The existing literature is enriched,and a certain theoretical basis is provided for making decisions about cash holdings and investment for Chinese listed companies.
【Fund】: 国家自然科学基金重点资助项目(71031004);国家自然科学基金青年项目(71202137);国家自然科学基金创新研究群体资助项目(71221001);; 湖南省自然科学基金项目(12JJ4072);; 湖南大学“青年教师成长计划”资助
【CateGory Index】: F832.51;F275;F224
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