Muhammad Arfan
Syiah Kuala University, Banda Aceh, Indonesia

Hasan Basri, Risma Handayani, M. Shabri Abd. Majid, Heru Fahlevi
Syiah Kuala University, Banda Aceh, Indonesia

Azimah Dianah
Ar-Raniry Islamic State University (UIN Ar-Raniry), Banda Aceh, Indonesia

Year: January 2017
Volume: 26 No. 2
Pages: 1–12


This study is primarily aimed at identifying significant factors that affect the level of cash holding of 77 manufacturing companies listed in the Indonesian Stock Exchange for the period 2009 to 2013. Factors normally identified in the literature that affect cash holding, including the levels of growth opportunity, networking capital, and financial leverage of firms, are examined in the study. Other than these variables, this study also incorporated the profitability and capital expenditure of the firms as controlled variables. Out of 138 manufacturing companies, 77 companies were selected as sample of the study using the purposive sampling technique. Secondary data were gathered from the companies’ annual reports and analysed using panel regression of the Generalized Least Square (GLS) estimation model. This study empirically found that the level of growth opportunity has a positive effect, while the networking capital has an insignificant effect and financial leverage has a negative effect on cash holding of the companies, respectively. As for the controlled variables, profitability is recorded to have a positive effect, whereas capital expenditure has a negative effect on cash holding of the companies, respectively. These findings implied that in managing the level of cash holding, the manufacturing companies should take into consideration the importance of companies’ growth opportunity, financial leverage, profitability, and capital expenditure.