Digital Technologies, Investor Sentiment, Limits to Arbitrage and Value of Firm Cash Holdings in China's A Stock Market is Good

Xiaohui Chen; Jianhua Ye; Jinda Li; Han Yan; Hao Meng

doi:10.5755/j01.ee.35.2.32992

Authors

Xiaohui Chen School of Accountancy, Henan University of Engineering, China
Jianhua Ye 2School of Accountancy, Henan University of Economics and Law, China
Jinda Li School of Accountancy, Central University of Finance and Economics, China
Han Yan School of Accountancy, Henan University of Economics and Law, China
Hao Meng School of Accountancy, Henan University of Economics and Law, China

DOI:

https://doi.org/10.5755/j01.ee.35.2.32992

Keywords:

limits to arbitrage, investor sentiment, sustainable performance, digital technologies, value of firm cash holdings, asset pricing effect

Abstract

Cash is a firm’s most liquid asset and this asset can add firm value by mitigating firm financial constraints, reducing debt default risk and opportunity costs. But the positive and negative asset pricing effect of cash holdings are related to digital technologies, sustainable performance and investors’ sentiment and limits to arbitrage. The paper finds the digital technologies and sustainable performance, both are negatively associated with the value of cash holding. The current study also scrutinized that firm’s cash holding value appears to be positive in China’s A stock market, and this asset pricing effect is more significant in periods when investor sentiment is high and in firms confronting high level of limits to arbitrage. This research provides evidences on the asset pricing effect of firm cash holdings and on how inefficient capital market affects this asset pricing effect. The findings of this research are useful for firms) improving cash management and have implications for supervising department to improve stock market efficiency.

Author Biographies

Xiaohui Chen, School of Accountancy, Henan University of Engineering, China

Xiaohui Chen is a teacher in the School of Accountancy at Henan University of Engineering. She has done PhD and continuously participating in field of research. She has vast experience of teaching and research publications in reputed journals. Her research interests are Corporate finance, asset pricing and financial accounting. She has published a few articles in major international academic journals.

Jianhua Ye, 2School of Accountancy, Henan University of Economics and Law, China

Jianhua Ye is a teacher in the School of Accountancy at Henan University of Economics and law. His research interests are Corporate finance, asset pricing and corporate strategy. He has plan to pursue the his research the field of finance and accounts. His research significantly impacts the realm of financial education. He has been a full-time faculty member at his University.

Jinda Li, School of Accountancy, Central University of Finance and Economics, China

Jinda Li is currently Master's degree student in the School of Accountancy at Central University of Finance and Economics. His research interests are Corporate governance, management accounting and corporate strategy. He has a plan to pursue his education in the same field and complete his PhD. His research interests are corporate finance, Behavioural accounting, Financial Management, Strategic Management. Sustainability, Innovation and operations management.

Han Yan, School of Accountancy, Henan University of Economics and Law, China

Han Yan is currently a Master's degree student in the School of Accountancy at Henan University of Economics and Law. After finishing his degree he will start PhD. His research interests are corporate finance, Sustainable management, Innovation, and operations management.

Hao Meng, School of Accountancy, Henan University of Economics and Law, China

Meng Hao is a graduate student at Henan University of Economics and Law, majoring in asset pricing and behavioural corporate finance. He is a good student and have plan to follow the foot step of his teacher. He has a plan to serve in the corporate world along with completing his education. He will do the doctorate degree in the field of financial analysis and sustainable development.