Author(s)

Wei Weng, Xiaohan Jiang, Qiufang Ren and Lingyan Niu

Corresponding Author

Qiufang Ren

ABSTRACT

Taking the A-shares companies listed on Chinese exchanges during 2012-2016 as the study samples, from the inter-industry perspective, this paper provides a study on the difference in the proportion of cash holdings between the listed companies within the same industry, and an analysis on the industry characteristics affecting the difference. The empirical results show that there is generally a significant difference in the proportion of cash holdings between the listed companies of the industry; and that the uncertainty regarding profits of the industry, uniqueness of specific products, the degree of product market competition, and the asset structure of industry are all the important industry characteristics resulting in the difference in the proportion of cash holdings. The aforementioned results prove an effective empirical support for the balance theory, and manifest that companies listed on Chinese exchanges will determine an optimal proportion of cash holdings with consideration of the advantages and disadvantages of cash holdings.

KEYWORDS

Cash holdings, Industry-related difference, Balance theory