The determinants of corporate cash holdings: evidence from Shariah-compliant and non-Shariah-compliant corporations

Alnori, Faisal; Bugshan, Abdullah; Bakry, Walid

doi:10.1108/mf-02-2021-0085

Cited by 10 publications

(15 citation statements)

References 66 publications

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“…(El‐Halaby et al, 2021; Tsendsuren et al, 2021). Recently, Alnori et al (2021) find the determinant factors of corporate cash holdings in the Gulf Cooperation Council (GCC). Faysal et al's (2021) document significantly relationship between corporate governance mechanisms and the cost of equity capital in emerging markets.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The religion effect on corporate cash holding in China: Buddhism and Taoism

et al. 2022

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Buddhism and Taoism have been deeply rooted in China for generations and both of them have a profound impact on the local culture and social norms. By employing 23,999 firm‐year observations between 2008 and 2018, we examine how local religious norms affect corporate cash policies. We provide strong evidence that religiosity significantly reduces the level of corporate cash holdings, by mitigating financial constraints and earnings management of the listed companies. Managers from religious areas make more effective investments and distribute more dividends. Furthermore, our findings document that religion has a more pronounced influence on cash holdings amongst the firms with the smaller size, lower leverage, higher marketization, effective internal control and facing fierce market competition. Overall, Buddhism and Taoism, constituting the main religious norms in China, significantly optimize the firms' cash holdings and firm value.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

The religion effect on corporate cash holding in China: Buddhism and Taoism

et al. 2022

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“…Islamic corporate finance literature confirmed that cash holdings decisions vary across Shariah-compliant and conventional firms (Alnori et al , 2021; Bugshan et al , 2021a; Hakim et al , 2021). More specifically, Bugshan et al (2021a) found that the cash holdings level is significantly higher in Shariah-compliant firms than their conventional counterparts operating in GCC markets.…”

Section: Literature Review and Hypothesesmentioning

confidence: 90%

“…They justified these findings through the limited external financing sources available to Shariah-compliant firms that make the transaction cost saving for holding cash more valuable for Shariah-compliant firms relative to conventional firms. In addition, using a sample of GCC listed firms, Alnori et al (2021) proposed that the determinants of corporate cash holdings vary between Shariah-compliant firms and conventional firms. However, these studies did not investigate how cash holdings can variously impact the performance of Shariah-compliant and conventional firms.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…As predicted by the trade-off theory, the external expensive funding makes the transaction cost-saving and the precautionary motives for holding cash more valuable for financially restricted firms. Accordingly, it is evident that Shariah-compliant firms have different cash management policies from conventional corporations (Bugshan et al , 2021a; Alnori et al , 2021). Therefore, the current study expects that cash holdings may exhibit a different effect on Shariah-compliant and conventional firms’ performances.…”

Section: Introductionmentioning

confidence: 99%

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Cash holdings and firm performance: empirical analysis from Shariah-compliant and conventional corporations

Alnori

Bugshan

2022

IMEFM

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Purpose This paper aims to provide a comprehensive investigation into the different roles of cash holding decisions on Shariah-compliant and non-Shariah-compliant firms’ performance. Therefore, the objective of this study is to analyze the significant relationship of liquidity on Shariah- and non-Shariah-compliant corporations. Design/methodology/approach This study sample includes non-financial firms listed in six Gulf Cooperation Council (GCC) markets between 2005 and 2019. The study uses panel fixed effects and the dynamic generalized method of moments (system-GMM) models to test the relationship between cash holding and firm performance. The firms’ performance is measured using four widely used proxies representing book and market measures of performance including return on assets, return on equity, earnings before interest and tax to total assets and Tobin’s Q. Findings The results explore that the nature of the relationship between cash holdings and performance varies across Shariah-compliant and non-Shariah-compliant firms. Specifically, cash holdings are positively and significantly related to Shariah-compliant firms’ performance. However, cash reserves are not significantly related to conventional firms’ performance. These findings indicate that Shariah-compliant firms rely more on their cash holdings to avoid costly and less available external financing, meet everyday business needs and invest in profitable projects. In contrast, the value for cash holding is less important for non-Shariah-compliant firms, as their external financing options are less restricted compared to Shariah-compliant firms. Research limitations/implications This study is not free from limitations. More specifically, the sample of this study comprises of firms listed in GCC countries, which share common features. It would be interesting for future research to examine the linkage between cash holdings and Shariah-compliant and conventional firms’ performance by applying a larger sample, such as firms located in countries of the Organization of Islamic Cooperation. Practical implications The findings of this paper provide useful insights for managers and investors on the important role of cash management for Shariah-compliant firms. Policymakers and bankers need to develop Shariah-based financial products to ease Islamic financing sources. Moreover, the findings of this paper call for more research on the importance of liquidity management for Shariah-compliant firms. Originality/value This study extends the Islamic finance literature by exploring the key role of cash holdings to Shariah-compliant firms. To the best of the authors’ knowledge, this study is the first study to investigate cash holdings and performance between Shariah-compliant and non-Shariah-compliant firms.

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“…GCC markets are considered in the finance literature due to their importance to the global economy (Alnori et al, 2021;Bugshan et al, 2021). Some studies investigated the behavioural factors related to individual investors in the GCC setting (Abdullah and Hilu, 2015;Alsedrah and Ahmed, 2017;Khawaja and Alharbi, 2021;Matoussi and Mostafa, 2016).…”

Section: Individual Investors' Behavioural Factors In the Gcc Marketsmentioning

confidence: 99%

Herd Mentality Amongst Equity Investors During COVID-19: Evidences from Saudi Arabia

Alnori

Ahmad²

2022

IJEFI

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The behaviour of individual equity investors during pandemics needs to be probed for better decision making. This study investigates the herd mentality amongst equity investors in Saudi Arabia in the context of COVID-19 (March 2020 to June 2021). The study is based on 326 responses and uses regression analysis as the anchor analytical technique. Additionally, the interaction of herding behaviour is probed in relation to overconfidence, emotions and independent decision making through a moderation analysis. The study found a negative moderating influence of age, gender and level of education on the herding behaviour of individual equity investors.

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The determinants of corporate cash holdings: evidence from Shariah-compliant and non-Shariah-compliant corporations

Cited by 10 publications

References 66 publications

The religion effect on corporate cash holding in China: Buddhism and Taoism

The religion effect on corporate cash holding in China: Buddhism and Taoism

Cash holdings and firm performance: empirical analysis from Shariah-compliant and conventional corporations

Herd Mentality Amongst Equity Investors During COVID-19: Evidences from Saudi Arabia

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