Cash Holding Deviation and Speed of Adjustment of Indonesian Firms

Abstract

Every corporate need cash. Corporate cash holdings always involve a trade-off between benefits and costs. Companies must hold cash on hand for different reasons such for the requirement of liquidating current assets to make payments of the companies transactions, dealing with unpredicted events, and so on. On other hand liquidity has high potential costs that will reduce corporate profit. Cash is unproductive asset that have small added value. In this study has some specificity. First, this research analyses determinant of optimal cash holding in Indonesian Firms. The Second this research to identify the deviation of Indonesia Firms' cash holding from the targeted level and identify speed of adjustment to reach the targeted cash holding of Indonesian firms. This research use panel data of Indonesian non-financial listed firms in Indonesian Stock Exchange during the period 2000-2015 with dynamic model. Cash holding of the firm may deviate from the targeted, it is because of adjustment cost. Panel regression analysis has been conducted to determine the major factors affecting cash holdings. these variable are Growth, Firm Size, Leverage, Profitability, Dividend, and Asset tangibility. The Formula is CH*i,t = f(Growth, Size, Lev, Prof, Div, Tang)). The adjustment of the firms for target level cash cannot be immediately achieved due to the associated adjustment costs. The speed of adjustment equation are: CHi,t -CH i,t-1 = αi (CH* i,t -CH i,t-1 ) or CH i,t =(1-αi )CH t-1 + δi,tCH* i,t Corporate cash holdings always involve a trade-off between benefits and costs. Companies must hold cash on hand for different reasons, but on other hand, over cash holding have consequences. On other hand liquidity has high potential costs that will reduce corporate profit. Cash is unproductive asset that have small added value. The companies in Indonesian need to balance of the benefit and the consequences of cash holding. The optimal Cash holding in Indonesia determined by firm characteristics

Determinan Cash Holding Pada Perusahaan Manufaktur Di Indonesia

“…Berdasarkan penelitian (Mercan, 2019), (Jebran, et al, 2019), (Abdioğlu, 2016), dan (Uyar dan Kuzey, 2014) menyatakan bahwa tangible asset memiliki pengaruh signifikan dan negatif terhadap cash holding, sementara (Thu dan Kuong, 2018), dan (Nafees, et al, 2017) menyatakan bahwa tangible asset memiliki pengaruh signifikan dan positif terhadap cash holding. Penelitian (Surwanti, 2017) menunjukkan bahwa tangible asset tidak memiliki pengaruh signifikan terhadap cash holding.…”

“…Hal ini sejalan dengan penelitian yang dilakukan oleh (Mercan, 2019), (Uyar dan Kuzey, 2014), (Jebran, et al, 2019) dan (Abdioğlu, 2016) yang menyatakan tangible asset memiliki pengaruh sigifikan dan negatif terhadap cash holding, namun tidak sejalan dengan penelitian yang dilakukan oleh (Nafees, et al, 2017) dan (Thu dan Kuong, 2018) yang mengatakan bahwa tangible asset memiliki pengaruh signifikan dan positif terhadap cash holding. Penelitian ini juga tidak sejalan dengan penelitian yang dilakukan oleh (Surwanti, 2017) yang memperoleh hasil bahwa tangible asset tidak memengaruhi cash holding secara signifikan. Penjelasan mengenai hal ini yaitu perusahaan yang memiliki tangible asset dalam jumlah yang banyak cenderung menahan kas dalam jumlah yang sedikit, hal ini dikarenakan perusahaan dapat menggunakan tangible asset tersebut sebagai jaminan untuk mengajukan pinjaman apabila perusahaan membutuhkan pendanaan eksternal berupa hutang akibat dari kurangnya jumlah kas yang dimiliki.…”