International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
FACTORS AFFECTING CASH HOLDING ON PROPERTY
AND REAL ESTATE COMPANIES
Martin Tanujaya1*.
Henryanto Wijaya1 Faculty of Economics and Business.
Universitas Tarumanagara.
Jakarta.
Indonesia Email: martintanujaya1@gmail.
*Corresponding Author Submitted: 10-11-2024.
Revised: 24-12-2024.
Accepted: 07-02-2025
ABSTRACT
The purpose of this research is to obtain empirical evidence regarding the influence of financial distress, inflation, institutional ownership, leverage, and firm size on cash holding in property & real estate companies listed on the Indonesia Stock Exchange in 2020 to 2022 period.
The sample in this research is 87 samples.
a period of 3 years which has been selected using purposive sampling, certain criteria, and data outlier.
This research was proceeded using Microsoft Excel 2019 and Eviews 12 software.
The results of this research show that financial distress, institutional ownership, and firm size have a positive effect on cash holding.
However, the results found for the variables consist of inflation and leverage have no effects on cash holding.
Keywords: cash holding, financial distress, inflation, institutional ownership, firm size
INTRODUCTION
One of the objectives of an entity in carrying out its business activities is to generate profit.
order to achieve the expected profit, companies are required to utilize cash as an instrument to obtain the anticipated gains, while simultaneously avoiding the risk of financial difficulties that could haunt every company.
Additionally, entities need to consider the optimal cash level that should be retained within a company, following a funding strategy in accordance with the pecking order theory.
Oversight by institutional parties is also predicted to be a management consideration for retaining cash within an entity.
When there is substantial oversight by institutional parties, the empowerment of cash allocated to operational activities and investment activities becomes more effective.
Institutional ownership has a positive impact on cash holding, and this finding is based on research presented by Jiang.
Li and Li, .
External influences also contribute to the level of cash retained within the entity.
The external influence referred to is the inflation rate.
Inflation signifies the weakening of purchasing power among the public due to rising prices of necessities and scarcity of raw materials.
The property and real estate sectors are vulnerable to inflation and interest rates because these types of companies have long business cycles involving the purchase of raw materials to the formation of finished buildings (Jones et , 2.
The ability of companies to purchase raw materials weakens as inflation increases.
Nevertheless, the ability of the public to purchase properties also weakens, leading to a decrease in company sales and the amount of cash received (Sari.
Kurniawati and Wulandari.
Inflation has a negative impact on cash holding (Ki and Adhikari, 2.
The company's access to the capital market provides ease for a company to obtain external When the cost of borrowing is higher than the cost of holding cash, companies tend to choose the option of holding cash (Sari.
Kurniawati and Wulandari, 2.
The consideration of a company in choosing external funding to carry out its investment activities can enhance a company's profits because if the company uses this funding to purchase assets, https://doi.
org/10.
24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
those assets can generate income and increase the amount of a company's assets (Alicia et al.
Leverage has a negative impact on cash holding (Yudaruddin, 2019.
Ki and Adhikari.
Oktafiana and Hidayat, 2022.
Romel and Ekadjaja, 2.
The size of a company influences the company's consideration to retain cash within the larger companies tend to have smaller cash reserves because they have access to the capital market and can easily obtain debt (Yudaruddin, 2.
However, the size of the company is not an absolute measure of the amount of cash retained by the company, as companies still require a significant amount of cash to carry out their operational activities.
Firm size has a positive impact on cash holding (Alicia et al.
, 2.
The aim of this research is to obtain empirical evidence regarding the influence of financial distress, inflation, institutional ownership, leverage, and firm size on cash holding.
The benefits derived include the realization of knowledge acquired by the researcher during their academic studies, with the hope that this journal contributes to the understanding of accounting and economic knowledge for students, the public, and the educational community.
RESEARCH METHOD
Signaling Theory Signal theory is a theory that explains the performance results of an entity in meeting investors' desires through signaling (Liestyasih and Wiagustini, 2.
Additionally, signal theory emphasizes providing good signals to investors through effective earnings management, indicating that the information asymmetry between management and stakeholders in the entity is small or insignificant, enabling investors to differentiate between entities with good and poor performance (Ekasari Harmadji et al.
, 2.
Trade Off Theory The Trade Off theory elucidates that the value of a company can be maximized when the increase in profits from holding cash equals the additional cost of holding cash (Bangun.
Natsir and Ngadiman Ngadiman, 2.
There are two transaction motives focused on the trade-off theory, the first motive being transaction cost motive, which refers to the benefit a company gains by holding cash to reduce transaction costs without liquidating assets for payments, the second motive being precautionary motive, which pertains to funding company if a company lacks external funding sources, it can fund financing activities using internal company funds (Guizani, 2.
The Correlation Between Variables Financial Distress and Cash Holding Financial difficulties faced by a company result in the company being on the brink of These companies are unable to generate profits through their operational activities and are unable to repay their debts, leading the company from initially experiencing mild difficulties to ultimately facing bankruptcy (Bangun.
Natsir and Ngadiman Ngadiman.
The correlation between financial distress and cash holding is consistent with the Trade-Off Theory, which advocates for maintaining optimal cash reserves within a company to fund its activities and avoid financial hardship (Guizani, 2.
https://doi.
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24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
Inflation and Cash Holding Inflation, indicating the increasing prices of basic necessities and the weakening purchasing power of the public, affects cash holding within entities.
According to the calculations and analysis presented by Ki and Adhikari, .
, it is stated that inflation has a negative impact on cash holding, thereby validating the accuracy of the trade-off theory and pecking order theory, which suggest that a company evaluates the benefits and drawbacks of holding cash while determining the optimal level of cash holding.
Inflation aligns with the Trade-Off Theory, which posits that there is no optimal cash level, leading companies to maintain cash reserves for investment needs.
Consequently, irrespective of macroeconomic conditions such as inflation rates, companies will continue to hold cash.
Institutional Ownership and Cash Holding In companies with strong institutional ownership, it affects the factor of the amount of cash Research findings on the influence of institutional ownership on cash holding, as proposed by Ridha.
Wahyuni and Sari, .
, lead to the conclusion that institutional ownership has a negative impact on cash holding.
This is because external oversight increases performance, requiring management to be transparent about the information provided to This reality results in a decrease in the amount of cash held when there is an increase in institutional ownership.
Institutional ownership aligns with the Trade-off Theory, which explains the contrasting influence between institutional oversight and the amount of cash held within an entity.
Leverage and Cash Holding A high level of leverage in a firm indicates that the firm is able to easily obtain funding from external sources, leading the company to have a tendency to hold a small amount of cash.
This argument is supported by research findings from Ki & Adhikari .
Oktafiana and Hidayat, .
Romel and Ekadjaja, .
, and Yudaruddin .
, which produce research data and analysis showing that leverage has a negative impact on cash holding.
The leverage variable aligns with the trade-off theory, which explains the contrasting relationship between increasing debt ratios and the amount of cash held within a company.
Firm Size and Cash Holding The size of a company can be evidenced by the amount of assets controlled by the firm.
Large companies/firms have a greater number of assets compared to small companies, and a larger amount of assets correlates with the cash and cash equivalents held by the entity.
Based on the testing and calculations obtained by Alicia et al.
, .
, it is stated that the size of the company signals a positive influence on cash holding and validates previous statements.
The theory supporting the influence of firm size on cash holding is the Signaling Theory, which explains that large companies signal to investors regarding their performance and the amount of assets within the entity (Liestyasih and Wiagustini, 2.
https://doi.
org/10.
24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
Research Framework The research framework interpreted as described below.
Figure 1.
Research Framework Research Hypothesis The financial difficulties faced by a company result in the company being on the brink of These companies are unable to generate profits through their operational activities and are unable to repay their debts, leading from initially mild financial struggles to eventual bankruptcy (Bangun.
Natsir and Ngadiman Ngadiman, 2.
H1: Financial distress has negative and significant effect on cash holding Inflation, indicating an increase in the prices of essential goods and a weakening of purchasing power among the public, influences cash holding within entities.
This is evident in the calculation and analysis results presented by Ki and Adhikari, .
it is stated that inflation has a negative impact on cash holding, thereby validating the accuracy of the tradeoff theory and the pecking order theory, wherein a company evaluates the benefits and drawbacks of holding cash while determining the optimal level of cash holding.
H2: Inflation has negative and significant impact effect on cash holding In companies with a strong institutional ownership, it significantly influences the amount of cash held.
The research findings regarding the impact of institutional ownership on cash holding presented by (Ridha.
Wahyuni and Sari, 2.
yield a conclusion that institutional ownership has a negative impact on cash holding, as external oversight enhances performance, demanding management transparency in the information conveyed to This reality leads to a decrease in the amount of cash held when institutional ownership increases.
H3: Institutional ownership has negative and significant effect on cash A high level of leverage in a firm indicates that the firm is able to easily obtain funding from external sources, leading the company to tend to hold a smaller amount of cash.
This argument is supported by research findings by Yudaruddin, .
Ki and Adhikari, .
Oktafiana and Hidayat, .
Romel and Ekadjaja, .
resulting in research data, test https://doi.
org/10.
24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
results, and analysis indicating that leverage has a negative impact on cash holding.
H4:
Leverage has negative and significant effect on cash holding The size of a company can be evidenced by the amount of assets controlled by the firm.
Large companies have more assets compared to small companies, and a higher number of assets correlates with the cash and cash equivalents held by the entity.
Conclusions based on testing and calculations obtained by Alicia et al.
, .
it is stated that the size of the company signals a positive influence on cash holding and validates the previous statement.
H5: Firm size has negative and significant effect on cash holding Population and Sampling Techniques The population in this study is limited to companies in the property and real estate sectors that are listed and have undergone IPO on the Indonesia Stock Exchange before the years The sampling method employed to obtain research samples applies non-random sampling, namely purposive sampling.
Purposive sampling utilizes a sampling technique by obtaining data through parties with authority over the data or parties with proportional data based on predetermined criteria (Sekaran & Bougie, 2.
The selection criteria for samples in this study include several categories, namely: A.
Property & real estate companies listed on the Indonesia Stock Exchange during the period 2020-2022.
Property & real estate companies that have conducted IPOs before the year 2020.
Property & real estate companies that present financial statements or annual reports as of December 31st.
Institutions that hold shares in property & real estate companies listed on the Indonesia Stock Exchange during the period 2020-2022.
Variables and Measurement Methods Table 1.
Variabel Operationalization Variable Cash Holding Indicator Scale
Ratio
Financial Distress
Ratio
Inflation
Ratio
Institutional Ownership
Ratio
Leverage Ratio
Firm Size
Ratio
RESULTS AND DISCUSSIONS
Descriptive Statistics The results of descriptive statistical test on cash holding shows mean value of 0.
median value 0.
0163, maximum value 0.
09386 obtained by Lippo Karawaci Tbk.
in 2021, minimum value 0.
00005 obtained from Bhakti Agung Propertindo Tbk.
in 2022, and standard https://doi.
org/10.
24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
The mean value of financial distress, as indicated by the Z-score, is 0.
118356, the median financial distress value is 0.
The maximum financial distress value is 0.
3286, obtained from Maha Properti Indonesia Tbk.
in 2022, the minimum financial distress value is 0.
obtained from Kota Satu Properti Tbk.
in 2022, and the standard deviation of financial distress is 0.
Inflation, denoted by IR, has a mean value of 0.
026033, the median inflation value is 0.
The maximum inflation value is 0.
0421 in 2022, indicating the highest inflation rate during the research period.
The minimum inflation value is 0.
0156, indicating the lowest inflation rate in 2021.
The standard deviation of inflation is 0.
Institutional ownership has a mean value of 0.
610154, the median institutional ownership value is 0.
The maximum institutional ownership value is 0.
9775, obtained from Indonesian Paradise Property Tbk.
from 2020 to 2022.
The minimum institutional ownership value is 0.
0512, obtained from Bakrieland Development Tbk.
in 2020 and 2021.
The standard deviation of institutional ownership is 0.
The mean value of leverage is 0.
The median leverage value is 0.
the maximum leverage value is 1.
1593 in 2022, obtained from Bliss Property Indonesia Tbk.
, the minimum leverage value is 0.
0191, obtained from Agung Semesta Sejahtera Tbk.
The standard deviation of leverage is 0.
The mean value of firm size is 28.
69096, the median firm size value is 28.
The maximum firm size value is 31.
58380 in 2021, obtained from Lippo Karawaci Tbk.
, the minimum firm size value is 25.
63180, obtained from Bekasi Asri Pemula Tbk.
The standard deviation of firm size is 1.
Figure 2.
Descriptive Statistics Heteroskedasticity Test Based on the heteroskedasticity test using the Breusch-Pagan-Godfrey model, the F probability value is 0.
So, based on the value of 0.
1236 is greater than 0.
05, thus passing the heteroskedasticity test in the Breusch-Pagan-Godfrey model.
https://doi.
org/10.
24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
Normality Test The results of the normality test yield a Jarque-Bera probability value of 0.
063751, which is greater than 0.
It can be deduced that the data utilized in the normality calculation process are normally distributed, thus validating the assumption of normality for the regression model Multicollinearity Test The examination results of the correlation between independent variables consisting of financial distress, inflation, institutional ownership, leverage, and firm size yield correlation values below 0.
8, thus concluding that the multicollinearity test has been passed.
Autocorellation Test The Durbin-Watson score or DW score obtained is 2.
174982, whereas the score obtained from the Durbin-Watson table, or DU table, is 1.
Based on the criteria established for the Durbin-Watson autocorrelation test, which is DU < DW < 4 - DU, an equation is derived 7485 < 2.
1745 < 2.
The DW value obtained lies in between, exceeding the DU table value and being less than 4 - DU.
Based on the calculated Durbin-Watson scores, it is concluded that the data used in this study satisfies the classical assumption of autocorrelation.
Multiple Linear Regression Test Multiple linear regression analysis used in this study has the following equation:
Explanation:
: Cash Holding 0
: Constant
1, 2, 3, 4, 5 : Regression coefficients : Entity i : Period t : Financial Distress
: Inflation Rate
: Institutional Ownership
DAR
: Leverage Size : Firm Size : Error F Test The output value produced yields a probability value (F-statisti.
This figure is smaller than 0.
05, indicating that the independent variables consisting of financial distress, inflation, institutional ownership, leverage, and firm size are concluded to have a simultaneous effect on the dependent variable, namely cash holding.
T Test The first independent variabel which is financial distress has the regression coefficient value 101910, and the probability value is 0.
0005, which is smaller than 0.
Based on these values, it can be concluded that financial distress has a significant positive effect on cash The variable inflation yields a coefficient value of -0.
209520 and a probability value 0570, which is greater than 0.
It can be verified from these results that the inflation variable does not have a partial effect on cash holding.
The variable institutional ownership can be verified by the regression coefficient value of 0.
026523 and the probability value of Both results indicate that institutional ownership has a significant positive effect on cash holding.
The variable leverage, through t-testing, yields a regression coefficient value of https://doi.
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24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
005344 with a probability value that is excessively high at 0.
This result indicates that leverage as an independent variable does not have a significant effect on the variable cash holding.
The variable Firm size as an independent variable in partial testing yields a regression coefficient value of 0.
005904 along with a probability value of 0.
Both results interpret that Firm size actually has a positive and significant effect on cash holding.
Adjusted R-Square Test The calculation of the determination coefficient yields a figure of 0.
318834 or 31.
Based on the calculated result shown above, it is concluded that the independent variables consisting of financial distress, inflation, institutional ownership, leverage, and firm size have the ability to explain 31.
9% of the variation in cash holding.
The remaining percentage, which is 68.
represents other variables that explain cash holding beyond the scope of this study.
CONCLUSIONS AND SUGGESTIONS
This research aims to generate empirical or theoretical evidence regarding the influence of independent variables, including financial distress, inflation, institutional ownership, leverage, and firm size, on the dependent variable, namely cash holding.
The sector of companies applied in this study is the property and real estate sector listed on the Indonesia Stock Exchange during the period from 2020 to 2022.
The sampling technique employed in this research utilizes non-probability sampling, followed by the implementation of data collection methods, namely purposive sampling.
After eliminating and addressing outliers, a total of 29 companies were sampled within the three-year research period.
The overall number of samples used in this study is 87.
The data processing involved in the calculation process utilized Microsoft Excel 2019, while data analysis and conclusion drawing processes were carried out using Eviews (Econometric view.
12 software.
In the first independent variable, financial distress, it was found that financial distress has a positive effect on cash holding, whereby lower financial distress scores lead to decreased cash holding.
This research finding aligns with Yudaruddin's study .
, which states that financial distress positively affects cash holding.
However, this result contradicts Bangun et 's research .
, which suggests that financial distress significantly negatively impacts cash holding.
Regarding the second variable, inflation, the result indicates that inflation does not affect cash holding.
This lack of influence can be attributed to companies still needing cash to carry out their activities, regardless of the current inflation rate.
This result contradicts various previous studies, as some have shown that inflation negatively affects cash holding (Ki & Adhikari, 2.
, while others indicate a positive influence (Das.
Hasan and Sutradhar.
The third independent variable, institutional ownership, yields the conclusion that institutional ownership has a positive impact on cash holding.
This suggests that institutional ownership, through oversight, increases a company's cash holding value.
This finding aligns with Jiang.
Li and Li, .
, which suggests a positive effect of institutional ownership on cash holding.
However, it contradicts Ridha.
Wahyuni and Sari, .
research, which suggests a negative impact, as well as Ikhsani.
Gurendrawati and Nasution, .
research, which indicates no effect.
Regarding leverage, it was found that leverage does not affect cash holding.
This lack of impact can be attributed to companies preferring to use internal funds as a source of financing rather than external sources.
This statement is consistent with the pecking order theory, which outlines the financing hierarchy within a company.
This finding aligns with Sari et al.
's study .
, which states that leverage does not affect cash holding.
However, it contradicts Alicia et al.
's research .
, https://doi.
org/10.
24912/ijaeb.
International Journal of Application on Economics and Business (IJAEB) Volume 3.
Issue 1, 2025.
ISSN: 2987-1972
which suggests a positive effect, as well as several other studies (Ki & Adhikari, 2022.
Oktafiana & Hidayat, 2022.
Romel & Ekadjaja, 2023.
Yudaruddin, 2.
, which indicate a negative impact.
The last independent variable, firm size, yielded research findings indicating that firm size has a positive impact on cash holding.
Based on these results, it can be concluded that larger companies hold more cash and cash equivalents compared to smaller This conclusion is solely based on a company's size.
This result aligns with Alicia et 's study .
, which suggests a positive effect of firm size on cash holding.
However, it contradicts studies by Ki & Adhikari .
and Ridha et al.
, which suggest a negative impact.
Additionally, it does not align with studies by Oktafiana & Hidayat .
Romel & Ekadjaja .
, and Yudaruddin .
Throughout the entire process of composing this journal, there are various limitations that are suggested to be taken into consideration for future research.
The limitations/constraints found in this study include: .
the independent variables applied in this research are limited to 5 variables consisting of financial distress, inflation, institutional ownership, leverage, and firm size with an adjusted R-square result of only 31.
9%, indicating that approximately 68.
1% of other variables influence cash holding.
The research sample in this study only encompasses property and real estate companies listed on the Indonesia Stock Exchange (IDX).
The research period is limited to only 3 years from 2020 to 2022.
Based on various limitations outlined above, it is hoped that future research can develop additional variables or utilize other variables that have the probability to influence cash Additionally, it is expected that future studies can explore different entity sectors, thereby yielding more varied results regarding the impact of each variable on cash holding.
Moreover, the research period could be more extensive so that the data from testing and analysis accurately depict the existing conditions and realities.
REFERENCES