The determinant of cash holdings: Evidence from Chinese listed companies

Using system generalized method of moments(GMM) estimation, this study estimates a dynamic. cash. holdings model on a panel dataset of 465 firms from Chinese Stock Markets for the 1998-2003 period. The results show that there are significant dynamic effects in the determination of firms' cash,holdings. In addition, it provides evidence that cash flows, growth opportunities and size of firms exert positive impacts on their cash holdings, while non-cash liquid assets and leverage exert negative impacts on cash holdings. Most of the variables that are relevant for explaining cash holdings in the United States and European countries are also relevant in China.