Research of Corporate Governance Levels and Cash Holdings Dynamic Adjustment Behavior

Abstract

Taking A-share listed companies listing in the Shanghai and Shenzhen stock exchanges during 2000 and 2009 as the research sample, this paper investigates the effect of corporate governance levels and its rate of change on the dynamic adjustment of cash holding, from the two aspects, which is the adjustment speed to the optimal cash levels and the deviation from optimal cash holdings. The empirical results show that, under the higher corporate governance levels and the faster the speed of corporate governance improvement, the adjustment speed of cash holding is faster. At the same time, if corporate governance levels is higher, the deviation from optimal cash holdings is lower. Also, from the dynamic perspective, under the faster speed of corporate governance improvement, the deviation from optimal cash holdings is lower.