| Summary: | 碩士 === 國立臺灣大學 === 商學研究所 === 105 === This research investigates the association among cash holdings, investment and the value of financially constrained firm in Taiwan stock market. I build a linear regression model to test whether change in cash plays an important role in a firm’s excess stock return. The results show that change in cash significantly affects firm value. In addition, I find that there is no significant relation between cash holdings and investment; however, the marginal value of investment in financially constrained firms is higher. I interpret these findings as the view that financially constrained firms, compared with financially unconstrained counterparts, treasure their cash holdings to undertake investment projects. On the other hand, the empirical evidence suggests that the reason for cash holdings being more valuable for financially constrained firms is due to precautionary motive; financially constrained firms rely on more cash to keep their operation.
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