Cut Tifani Urahmah, Rita Meutia, Raida Fuadi

Determinants of Cash Holding: An Empirical Study of Non-Cyclical Consumer Companies on the Indonesia Stock Exchange

Introduction

Determinants of cash holding: an empirical study of non-cyclical consumer companies on the indonesia stock exchange. Examine cash holding determinants in Indonesian non-cyclical consumer companies (2021-2023). Analyzes net working capital, growth opportunity, and leverage on IDX. Empirical insights.

Abstract

This study aims to examine the effect of net working capital, growth opportunity, and leverage on cash holding in non-cyclical consumer sector companies listed on the Indonesia Stock Exchange (IDX) during the 2021-2023 period. The results show that simultaneously, net working capital, growth opportunity, and leverage have a significant effect on cash holding. Partially, net working capital has a significant positive effect on cash holding while growth opportunity has no effect on cash holding, and the leverage variable has a negative effect on cash holding. Future research is recommended to cover more industrial sectors as well as a longer period of time and can add other variables using different analytical methods.

Review

This study provides a focused empirical investigation into the determinants of cash holding, specifically within non-cyclical consumer companies listed on the Indonesia Stock Exchange (IDX). The choice of this sector and market offers valuable insights into corporate financial management in an emerging economy, particularly regarding a crucial aspect like cash management. The paper clearly articulates its objective: to examine the influence of net working capital, growth opportunity, and leverage on the level of cash held by these firms, contributing to the understanding of corporate liquidity decisions in this context. Utilizing data from the 2021-2023 period, the research identified several key relationships. The findings indicate that, collectively, net working capital, growth opportunity, and leverage significantly impact cash holding. Delving into the individual effects, net working capital is shown to have a significant positive relationship with cash holding, suggesting that firms with higher working capital tend to hold more cash. Conversely, leverage exhibits a significant negative effect, aligning with the notion that highly leveraged firms may prioritize debt repayment or have less flexibility for cash accumulation. Interestingly, growth opportunity was found to have no significant effect on cash holding within this specific sample and period, a finding that warrants further exploration. While the study offers valuable initial insights, the authors appropriately acknowledge certain limitations, particularly the constrained scope in terms of industrial sectors, the relatively short observation period, and the limited number of variables considered. These limitations are transparently addressed through well-articulated recommendations for future research, including broadening the industry coverage, extending the time horizon, and incorporating additional variables or alternative analytical methods. This forward-looking perspective enhances the paper's contribution by setting a clear agenda for subsequent studies to build upon its foundational findings within the Indonesian market.

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