유보이익과 현금보유수준이 차기투자에 미치는 영향

Because of government’s claim that firms have increased a lot of internal reserves and cash holding, and have not increased investment. government implements ‘Corporate Earnings Circulation Taxes’(CECT hereafter) to encourage investment. The growth of internal reserves and cash holding, however, is common in many countries like Korea. Firms make decisions to invest carefully, as during unstable economic situations, firms could have a big risk about the success of their investments. If they fail to implement a successful investment, they could suffer serious financial problems. In this regards, this study analyzed whether a lot of internal reserve and cash holding are related to decreased investment. In addition, we analyzed value relevance of investment according to the firms’s tendency of investment. The results showed that the internal reserves and cash holdings were not related to decreased investment. The more internal reserves and cash holdings the firms had, the more their investments were established. Further, the firms that had a lot of internal reserves and cash holding showed high value relevance of investment. Abundant cash holdings caused investors to enhance monitoring and CEOs did make an effective investment. Contrary to government’s claim, the firms that had a lot of internal reserves and cash holding had a higher rate of investment and value relevance of investment. Investors could judge firm’s value by considering the firm’s tendency of investment.