| Summary: | 碩士 === 亞洲大學 === 財務金融學系碩士班 === 100 === This study examines the determinants and implications of corporate cash holdings in Taiwan’s stock market by focusing on 3 primary hypotheses: transaction motive, precautionary motive, and future investment opportunities. This research uses sample firms listed on the Taiwan stock market between 1991 and 2010 to show that large firms tend to hold less cash, which supports the transaction motive argument. Cash flows to assets, net working capital to assets, and capital expenditure show a positive and significant relationship with the cash holdings of firms, suggesting that the investment opportunities hypothesis holds. In other words, firms must reserve more cash to meet their future investment requirements. The evidence presented in this research indicates that the investment opportunities hypothesis explains the behavior of corporate cash holdings. Moreover, predation theory suggests that firms with more cash reserves expand their future performance in product markets. This research also shows that cash reserved for lagged one-year and lagged two-year periods has a positive association with product market competition. Finally, the results of 2SLS regression analysis suggest that no significant interactive relationship among firm characteristics, cash holdings and product market competition.
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