Governance environment, cash holding and performance

Based on China's A-share listed manufacturing companies' data for 2002-2007, used marketization indexes of various regions of China compiled by Fan Gang etc. to construct corporate governance environment, we study the relationship between governance environment, cash holdings and performance empirically. We find that cash holdings have a positive influence on performance, which seems more apparent in the poor governance environment regions. In the good governance environment regions, cash held by non-state companies has a greater impact on performance relative to the state-owned companies.