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Financial Asset allocations and Corporate Financing and Investment Decisions: Theory and Evidence from China
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TitleFinancial Asset allocations and Corporate Financing and Investment Decisions: Theory and Evidence from China  
AuthorZhang Jun,Liu Guanchun and Liu Yuanyuan  
OrganizationFUDAN University 
Emailjunzh_2000@fudan.edu.cn; 
Key WordsFinancial asset allocations; Fixed investment; Leverage; Reservoir; Substitution 
AbstractDividing financial assets into liquid assets and speculative assets, this paper builds an extended three-stage dynamic model to explore the effects of financial asset allocations on corporate financing and investment decisions. Theoretical analysis show that, holding liquid assets lowers leverage and promotes fixed investment, while allocating speculative assets plays an adverse role. Specifically, the reservoir roles of liquid assets maintain consistent, but the substation roles of speculative asset change into reservoir in the long run since providing more capital with higher return. Furthermore, using the semi-annual nonfinancial listed firms from 2007 to 2015, this paper measures the allocations of liquid assets and speculative assets with the ratios of financial assets holding and financial profits, and then conducts series of empirical tests. The results support the previous theoretical predictions. 
Serial NumberWP1322 
Time2019-01-08 
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