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Based on the corporate life cycle theory, the effects of corporate excess cash holdings on firm value is conducted in this paper. The results show that a significant inverse U-shaped relation exists between excess cash holdings level and firm value. It indicates that lots of companies face the problem of financing constraints. Moreover, the results also show that the optimal excess cash holdings level is discrepant at different corporate life cycle stages. Therefore, in order to ensure the corporate cash policy is reasonable, the corporate should make the cash policy according to which corporate life cycle stage it is at. Index Terms - Excess cash holdings level, Firm value, Corporate life cycle From above study, we can find that it is necessary to examine the effects of the excess cash holding on firm value by synthetically considering the above two viewpoints. We consider that the corporate life cycle may exert significant influence on the efficiency of corporate decisions. We investigate the effects of excess cash holdings on firm value based on the corporate life cycle theory. We hope that our study can enrich the research about excess cash holdings and firm value.

Effects of Excess Cash Holdings on Firm Value: Study from the Perspective of Corporate Life Cycle