Corporate Cash Holdings and Speed of Adjustment: Does Shariah Compliance Matter?

This study examines the impact of the shariah complaint status on corporate cash holdings, the speed of adjustment towards its target cash holdings, and the effect of firm-specific factors on corporate cash holdings. The data of non-financial firms listed on the Pakistan Stock Exchange from 2015 to...

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Bibliographic Details
Published in:Islamic banking and finance review 2023-05, Vol.10 (1), p.24-50
Main Authors: Asghar Butt, Affaf, Sadique, Riffat, Shahzad, Aamer
Format: Article
Language:English
Online Access:Get full text
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Summary:This study examines the impact of the shariah complaint status on corporate cash holdings, the speed of adjustment towards its target cash holdings, and the effect of firm-specific factors on corporate cash holdings. The data of non-financial firms listed on the Pakistan Stock Exchange from 2015 to 2020 has been collected. The panel data methodology is used. The findings imply that shariah-compliant firms hold more cash than non-shariah-compliant firms. The adjustment speed toward its target cash holdings is faster in shariah compliant firms. The financial leverage and cash flows show a negatively significant effect on corporate cash holdings. The working capital, dividend, and profitability exert a significant positive change on cash holdings. Explaining the cash-holding determinants reveals that trade-off and pecking order theories play a central role. This study is beneficial for policymakers, managers, and investors.
ISSN:2413-2977
2221-5239
DOI:10.32350/ibfr.102.02