The hidden liquidity cost of pawn expansion: Evidence from Pegadaian

Background: Pawn finance provides households with access to collateralized liquidity, but less is known about how growth in core pawn receivables is associated with the lender’s own short-horizon balance-sheet liquidity. This study examines that relationship for Pegadaian and evaluates whether the observed pattern is consistent with short-run asset–liability adjustment. Methods: The analysis uses 101 monthly observations from January 2017 to May 2025. Liquidity is proxied by the current ratio, while pawn expansion is measured by the monthly log growth of outstanding core pawn receivables. The baseline dynamic regression uses 98 observations after transformations and lags and applies Newey–West heteroskedasticity- and autocorrelation-consistent inference. Findings: Pawn-receivable growth is associated with a statistically significant same-month decline in the current ratio. A positive one-month coefficient in the baseline specification is consistent with partial subsequent adjustment, although this lagged association is less stable across robustness specifications and the cumulative two-month association is not statistically distinguishable from zero. The contemporaneous result remains robust to alternative heteroskedasticity and autocorrelation consistent (HAC) bandwidths, calendar-month controls, and a log transformation of the liquidity outcome, while formal stability tests indicate no detectable structural break. Current assets and current liabilities both increase contemporaneously with pawn-receivable growth, with the liability coefficient numerically larger. Conclusion: The findings are consistent with short-horizon balance-sheet liquidity pressure accompanying rapid pawn-receivable growth, but they do not establish a causal effect. Novelty/Originality of this article: The study shifts the pawn-finance discussion from customer-side liquidity toward institution-side short-horizon balance-sheet adjustment using monthly evidence from a major collateral-based nonbank lender.