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