The Value of Cash: Evidence from Indonesia Listed Firms


This study investigates the influence of Islamic law on the value of cash holdings. The empirical analysis was conducted using Indonesian-listed companies from 2012 to 2020 as the research sample. It is hypothesized that companies adhering to Islamic law will increase the value of cash holdings. Considering the ownership structure, it is hypothesized that higher ownership by institutions and corporate insiders in Islamic-compliant companies will lead to higher value of cash holdings. The empirical results of this study reveal that companies adhering to Islamic principles do indeed increase the value of cash holdings. Additionally, higher institutional and insider ownership in Islamic-compliant companies increase the value of cash holdings. The empirical implications of this study suggest that religious beliefs influence managerial decision-making, leading to more cautious control over cash. Both religion and ownership structure play important roles in the efficient use of cash by managers.

Keywords: Islamic law, value of cash holdings, ownership structure

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