Shariah compliance and corporate cash holdings

Bugshan, Abdullah; Alnori, Faisal; Bakry, Walid

doi:10.1016/j.ribaf.2021.101383

Cited by 29 publications

(58 citation statements)

References 59 publications

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“…Second, our study differs from those focusing on Shariah-compliance and corporate cash holdings (e.g. Guizani & Abdalkrim, 2021;Bugshan et al, 2021) to the extent that these studies examine the direct effect of Shariah-compliance on cash holding decision, whereas, our study examines whether Shariah-compliance moderates the relationship between both EPU and GPR and corporate cash holdings.…”

Section: Introductionmentioning

confidence: 89%

Economic policy uncertainty, geopolitical risk and cash holdings: evidence from Saudi Arabia

Guizani

Talbi²,

Abdalkrim³

2023

AGJSR

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PurposeThis study aims to investigate the influence of economic policy uncertainty (EPU) and geopolitical risk (GPR) on corporate cash holding level and speed of adjustment (SOA) in one of the most important emerging markets in the Middle East and North Africa, Saudi Arabia. It also investigates whether Shariah-compliance as well as financial constraints affect the relationship between both EPU and GPR and corporate cash holdings.Design/methodology/approachThe study employs GMM regression considering a sample of 140 nonfinancial firms drawn from the Saudi stock market over the period 2002 to 2019.FindingsThe authors find evidence in support of the precautionary motive hypothesis. Facing costly external financing induced by economic policy-related uncertainty and geopolitical tension, Saudi firms tend to accumulate cash as a buffer against negative shocks to their cash flows. The results also show that the positive impact of EPU and GPR on the level of cash holding is less pronounced in Shariah-compliant firms, whereas it is more pronounced in more financially constrained firms. Evidence also reveals that the estimated adjustment coefficients show that Saudi firms adjust more quickly toward their target cash ratio in periods of high economic instability and geopolitical risks.Practical implicationsThis study has important implications for managers, policymakers and regulators. For managers, the study is an important reference to understand and design cash management policies by considering factors measured at the country level. More specifically, managers should pay more attention to periods of heightened uncertainties and geopolitical tensions in which the availability of funds is reduced. For policymakers and regulators, this study may be useful in assessing the effect of economic instability on firm’s cash holding decision. Therefore, in an effort to increase the supply of external financing available to firms, policymakers may devise investment friendly environment by controlling country-specific factors.Originality/valueThis paper shows how EPU and GPR as institutional environment factors affect cash holding decision in an oil-rich country.

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Section: Introductionmentioning

confidence: 89%

Economic policy uncertainty, geopolitical risk and cash holdings: evidence from Saudi Arabia

Guizani

Talbi²,

Abdalkrim³

2023

AGJSR

View full text Add to dashboard Cite

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“…Corporate cash holding (Cashi,t) is our dependent variable, which refers to the amount of cash held by firms to meet the needs of production and operation. Following Bugshan et al [23], we choose the ratio of cash and cash equivalent to the firm's total assets as the descriptive variable of the firm's cash holding level. To ensure the robustness of the estimation results, referring to the article of Bugshan et al [23], we select the ratio of the firm's cash and cash equivalents to the firm's net assets as a substitute index.…”

Section: Measurement Of Corporate Cash Holdingmentioning

confidence: 99%

“…Following Bugshan et al [23], we choose the ratio of cash and cash equivalent to the firm's total assets as the descriptive variable of the firm's cash holding level. To ensure the robustness of the estimation results, referring to the article of Bugshan et al [23], we select the ratio of the firm's cash and cash equivalents to the firm's net assets as a substitute index. A firm needs to hold a certain amount of cash, but for firms with poor profitability, holding cash may reduce firms' future earnings.…”

Section: Measurement Of Corporate Cash Holdingmentioning

confidence: 99%

“…The larger the value is, the higher the shareholding ratio is. Following Bugshan et al [23] and Chen et al [24], we control the influencing factors of corporate cash holdings, including firm size(Sizei,t), return on assets (ROAi,t), the networking capital (NWCi,t), firm financial leverage (LEVi,t), market-to-book ratio (MBi,t), and the listing age (Agei,t). Please refer to the appendix for details of these variables.…”

Section: Model Specificationmentioning

confidence: 99%

“…However, a large amount of cash flow can be gained by debts. Therefore, following Bugshan [23], we replace total assets with net assets, that is, cash and equivalents to total net assets, to test the robustness of our results. Table 4 reports the results of the changing indicators, in column (1), the effect of institutional investors ownership on cash holding, that is the coefficient of INSTi,t is 0.044, which is also statistically significant at the 1% level, indicating its positive effect on cash holding.…”

Section: Alternative Measuresmentioning

confidence: 99%

See 2 more Smart Citations

Does Institutional Investor Ownership Influence Corporate Cash Holding?

Jiang¹,

Li²,

Yan³

2021

Proceedings of the 2021 3rd International Conference on Economic Management and Cultural Industry (ICEMCI 2021)

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Based on a sample of Shenzhen and Shanghai Exchange in 2007-2017, this paper examines the effect of institutional investor ownership on corporate cash holding. We establish the fixed effects model to study the relationship between them, and we use robustness checks and derive our results also have the robustness. Moreover, we do the heterogeneity analysis and find the impact of institutional investor ownership on corporate cash holding is more pronounced in firms with non-state-owned and non-Big 4 auditings. Therefore, the empirical results show that the high institutional ownership improves the level of corporate cash holding and this positive effect is more pronounced in non-state-owned enterprises and firms with low audit quality.

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