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

Affaf Asghar; Riffat Sadique; Aamer  Shahzad

doi:10.32350/ibfr.101.02

Affaf Asghar University of the Punjab, Gujranwala Campus, Pakistan https://orcid.org/0000-0001-7508-7778
Riffat Sadique University of the Punjab, Gujranwala Campus, Pakistan
Aamer Shahzad University of the Punjab, Gujranwala Campus,Pakistan https://orcid.org/0000-0001-5785-6828

DOI: https://doi.org/10.32350/ibfr.101.02

Abstract

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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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