Cash holding or Net Debt, What is Relevant for Indonesian Firms?
Paper investigates the firm level determinants of cash holdings by Indonesian firms. It also examines net debt as substitute measure for cash holding in firm’s financial policies. Sample comprises of 483 Indonesian companies listed on Indonesia stock exchange. Study finds that firms with robust cash flows, and higher cost of capital hold more cash. Firms holding greater noncash liquid assets have moderate cash holdings. Cash holding is most relevant for financially constrained firms, and growth firms. Net debt appears to be most relevant element for low growth firms. No hedging firms are indifferent about their cash holdings and net debt.
1. Acharya, V., Almeida, H., & Campello, M. (2007). Is cash negative debt? A hedging perspective on corporate financial policies. Journal of Financial Intermediation, 16 (4), 515-554.
2. Baskin, J. (1987). Corporate liquidity in the games of monopoly power. Review of Economics and Statistics, 69 (2), 312-319.
3. Baumol, W. (1952). The transaction demands for cash: An inventory theoretic approach. The Quarterly Journal of Economics, 66 (4), 545-556.
4. Chudson, W. (1945). A Survey of Corporate Financial Structure. NBER Working Paper.
5. Custodio, C., Ferreira, M., & Raposo, C. (2005). Cash holdings and business conditions. ISCTE Business School.
6. Faulkender, M., & Wang, R. (2006). Corporate financial policy and the value of cash. The Journal of Finance. 61(4), 1957-1990.
7. Foley, C., Hartzell, C., Titman, S., & Twite, G. (2007). Why do firms hold so much cash? A tax based explanation. Journal of Financial Economics, 86 (3), 579-607.
8. Harford, J. (1999). Corporate cash reserves and acquisitions. Journal of Finance, 54 (6), 1969-1997.
9. Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency cost, and ownership structure. Journal of Financial Economics, 3 (4), 305-360.
10 Keynes, J. M. (1936). The general theory of employment, interest, and money, McMillan, London.
11 Mikkelson, W., & Partch, M. (2003). Do persistent large cash reserves hinder performance? Journal of Financial and Quantitative Analysis, 38, 275-294.
12 Miller, M., & Orr, D. (1966). A model of the demand for money by firms. Quarterly Journal of Economics, 80 (3), 413-435.
13 Myers, S. (1977). Determinants of corporate borrowings. Journal of Financial Economics, .5 (2), 147-175.
14 Myers, S., & Majluf, N. (1984). Corporate financing and investment decisions when firm have information that investors do not have. Journal of Financial Economics, 13 (2), 187-221.
15 Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52 (1), 3-46.
16 Pinkowitz, A., Stulz, R., & Williamson, R. (2006). Does the contribution of corporate cash holdings and dividends to firm value depend on governance? A cross-country analysis. The Journal of Finance, 61 (6), 2725-2751.
17 Vogel, R., & Maddala, G. (1967). Cross section estimates of liquid asset demand by manufacturing Corporations. The Journal of Finance, 22(4), 557-575.
- There are currently no refbacks.