Abstract: In the existing literature, various models have been developed to analyze the impact of company-level factors on companies’ cash holdings and how companies will dynamically adjust their cash holdings accordingly.Although there are some researches which explain the impact of single macroeconomic factor on companies’ cash holdings, there is almost no research on following-up dynamic adjustments. By reconstructing a static model and a dynamic model, with not only company-level variables but also three macro economic variables, and with a sample of 843 public companies in China over the period of 2001-2011, the analysis shows that all three macroeconomic variables are significantly correlated with companies’ cash holdings. Cash holdings’ correlations with the economic cycle and fiscal policy are negative, while correlation with monetary policy is positive; adjustment speed’s correlations with the variation in economic cycle and the change in monetary policy are positive, while with the change in fiscal policy it is significantly negative. It is also found that compared with state-controlled companies, cash holdings in non-state-controlled companies are more sensitive to the macroeconomic variations, and their adjustment speed is also faster. This research offers a more comprehensive view of corporate cash holdings’ behavior.

Key words: macroeconomic environment, cash holdings, dynamic adjustment, controlling interests