The Effect of Working Capital and Profitability on Cash Holding in the Industrial Sector

Rumaisya Syifa; Nazwa Fadilla Karim; Farah Margaretha Leon

doi:10.30741/ijamr.v7i1.1895

Authors

Rumaisya Syifa Universitas Trisakti
Nazwa Fadilla Karim Universitas Trisakti
Farah Margaretha Leon Universitas Trisakti

DOI:

https://doi.org/10.30741/ijamr.v7i1.1895

Keywords:

Cash Flow, Capital Expenditure, Net Working Capital, Profitability, Firm Size

Abstract

Cash holdings of manufacturing companies in Indonesia varied during 2020-2024 in line with changes in investment policies, funding structures, and operating cash flows. This condition reflects the challenges companies face in maintaining optimal liquidity levels. The aim here is to search for the Effect of net working capital, profitability, leverage, cash flow, capital expenditure, and firm size on cash holding. This research implements a quantitative technique by the analysis of data regression through the FEM. This sample contains 39 manufacturing institutions/companies that existed in ISE with a total of 195 observations during the 2020-2024 period. The results show that Net Working Capital, Leverage, Cash Flow, and Capital Expenditure have an effect on Cash Holding, while Profitability has a significant negative effect on Cash Holding. These findings have implications for company management in formulating cash policies that are in line with liquidity management and investment decisions.

References

Agnesstyaningsih, H., Pratiwi, D. N., & Pardanawati, S. L. (2023). Pengaruh Cash Flow Dan Net Working Capital Terhadap Cash Holding Dengan Firm Size Sebagai Variabel Moderating. Jurnal Ilmiah Keuangan Akuntansi Bisnis, 2(2), 283–295. https://doi.org/10.53088/jikab.v2i2.52Ahmed, J., & Tahir, M. (2024). Corporate cash holdings and financial performance: moderating effect of corporate governance and family ownership. South Asian Journal of Business Studies, 13(4), 563–580. https://doi.org/10.1108/SAJBS-11-2022-0385Akhtar, T. (2025). Cash holdings in the MENA region: evidence from trade -off model, pecking order theory, and agency theory. Future Business Journal. https://doi.org/10.1186/s43093-025-00454-5Al Barak, T. I. (2025). CORPORATE CASH HOLDINGS, WORKING CAPITAL, AND PROFITABILITY: EVIDENCE FROM SAUDI ARABIA. Investment Management and Financial Innovations, 22(1), 257–265. https://doi.org/10.21511/imfi.22(1).2025.19Bangun, D. P. S., & Priyanto, A. A. (2024). Profitability Determinant of the Insurance Sector in Indonesia. Accounting and Finance Studies, 4(2), 099–110. https://doi.org/10.47153/afs42.9032024Bo, L., & Li, J. (2025). Internal Corporate Governance and Cash Holding in China: The Moderating Effect of Product Market Competition. SAGE Open, 15(3), 1–14. https://doi.org/10.1177/21582440251368976Cahaya, A., Lombok, M., & Oktaryani, G. A. S. (2025). The Effect of Net Working Capital and Leverage on Cash Holdings (A Case Study of Food and Beverage Sector Companies Listed on the Indonesia Stock Exchange). 0(07), 4580–4588. https://doi.org/10.47191/jefms/v8Ekadjaja, A., Putera, H., & Agselia, S. (2022). Factors Determining Cash Holding in Manufacturing Companies. 216(Icebm 2021), 338–343.Elyasiani, E., & Movaghari, H. (2022). Determinants of corporate cash holdings: An application of a robust variable selection technique Determinants of Corporate Cash Holdings: An Application of Robust Variable Selection Technique. October. https://doi.org/10.2139/ssrn.3720095Halim, K. I. (2023). The Effect of Capital Expenditure, Sales Growth, and Leverage on Cash Holdings. 8(2), 112–119.Judijanto, L., & Ambarwati, R. (2024). The Effect of Working Capital Management, Leverage Policy, and Liquidity on Financial Performance in Construction Companies in Indonesia. West Science Journal Economic and Entrepreneurship, 2(04), 532–543. https://doi.org/10.58812/wsjee.v2i04.1404Jumah, Z., Younas, Z. I., Safdar, N., Abdulaziz, M., & Al-faryan, S. (2023). Cogent Economics & Finance Economic policy uncertainty and corporate leverage -does cash holdings matter? Evidence from the U. S. Economic policy uncertainty and corporate leverage -does cash holdings matter? Evidence from the U. S.Cogent Economics & Finance, 11(1). https://doi.org/10.1080/23322039.2023.2223809Krisyanto, H. T. (2024). Pengaruh Leverage, Profitabilitas, Ukuran Bank Dan Umur Bank Terhadap Cash Holding. Multiplier: Jurnal Magister Manajemen, 4(2), 66–74. https://doi.org/10.24905/mlt.v4i2.63Mariska, U., Suhendar, S., & Nurmalia, G. (2025). The Effect of Profitability, Liquidity, Firm Size, Net Working Capital, Leverage, and Growth Opportunity on Cash Holding: Empirical Study from Property and Real Estate Companies Listed in Indonesian Syariah Stock Index (ISSI) for The Period 2019-2023. Golden Ratio of Finance Management, 5(2), 279–296.

E-ISSN :2721-1126, P-ISSN : 2721-1118 Available online at:https://ejournal.itbwigalumajang.ac.id/index.php/ijamrInternational Journal of Accounting and Management ResearchVolume 7, Number 1, March2026| 43Phan, T. D., & Thi, T. H. (2025). The Moderating Role of Financial Constraints on the Relationship between Cash Holding Decisions and Debt Maturity Structure: Evidence from Vietnam. Global Business and Finance Review, 30(6), 70–78. https://doi.org/10.17549/gbfr.2025.30.6.70Puteri, A. N., Primalia, K., Verdiansyah, G. M., & Leon, F. M. (2022). Pengaruh Struktur Kepemilikan Terhadap Cash Holdings pada Perusahaan Manufaktur di Indonesia. Jurnal SEKURITAS (Saham, Ekonomi, Keuangan danInvestasi), 5(2), 181. https://doi.org/10.32493/skt.v5i2.15459Raafika, R., Verano, P., & Mantiri, D. M. (2023). The Effect of Cash Holding on Capital Structure of Companies Listed on the Indonesia Stock Exchange. 11(3), 1293–1304.Suwaidan, M. S. (2022). Determinants of Corporate Cash Holding: Evidence from an Emerging Market. Montenegrin Journal of Economics, 18(3), 109–119. https://doi.org/10.14254/1800-5845/2022.18-3.9Tawfik, O. I., Elmaasrawy, H. E., & Albitar, K. (2022). Political Connections, Financing Decisions and Cash Holdings: Empirical Evidence from the Gulf Cooperation Council. 1–33.Wang, D. (2024). Research on the Importance of Enterprise Cash Flow Management. Asia Pacific Economic and Management Review, 1(6), 21–27. https://doi.org/10.62177/apemr.v1i6.82Yilmaz, I. (2024). The Determinants of Corporate Cash Holdings: Novel Evidence from Emerging Countries. 18, 5–16.Yosita, T., & Tjakrawala, F. X. K. (2025). Jasim dan Tjakrawala: Pengaruh Cash Flow, Growth Opportunities, Dan Leverage .... VII(3), 1064–1074.Yulianti, A., Wijayanti, R., Paramita, D., Ana, S. R., & Jualiasari, D. (2025). The Role of Corporate Social Responsibility and Environmental Performance on the Company’s Financial Performance. 6(2), 44–51.Zalsabila yanti, nuramal, A. (2023). Effect Of Firm Size, Growth Opportunity, and Net Working Capital On369–380.