DETERMINANTS OF CASH HOLDINGS: EVIDENCE FROM SHARIAH-COMPLIANT FIRMS IN MALAYSIA

A firm that holds a higher level of cash may signify the presence of an agency conflict, as managers could use those resources based on their benefits and interests. Although previous studies discovered various factors that impact cash holdings, the literature on the findings for Shariah-Compliant Firms (SCFs) is still in its infancy. Hence, this study examines the determinants of cash holdings of SCFs listed in Bursa Malaysia to enrich the literature. The factors influencing corporate cash holdings are investigated using a static panel data regression. As the dataset has both firm fixed and time effects, this study further examines the robustness of the model by estimating standard errors clustered by firms while addressing the time effect. The results show that the significant determinants of cash holdings for SCFs are leverage, dividend, and cash flow. This result is robust using an alternative measurement of the dependent variable. Potential avenues for further research could involve investigating and contrasting the determinants of cash holdings between SCFs and Non-Shariah-Compliant Firms (NSCFs).