Product Market Competition and Dynamic Cash Holdings Adjustment

Based on the balanced panel data of Chinese listed firms from 2005 to 2008,this paper investigates the impact of product market competition and its changes on the speed of cash holdings adjustment.The empirical results show that the dynamic changes of product market competition have significant influence on the speed of cash holdings adjustment. The faster the dynamic change of product market competition is,the faster the speed of cash holdings adjustment will be.The findings also show that although the relation between the dynamic changes of product market competition and the speed of cash holdings adjustment is subject to the impact of the nature of firm and enterprise' growth.The positive correlation between the dynamic changes of product market competition and the speed of cash holdings adjustment will be much stronger in non state - owned and higher - growth enterprise.