Determinants of Cash Holding in Indonesian Industrial Companies

Abstract

This research investigates how net working capital, investment opportunity set, and cash conversion cycle influence cash holding decisions among industrial companies listed on the Indonesia Stock Exchange during 2020-2023. Employing purposive sampling methodology, 36 companies were selected from a population of 66 firms, generating 144 observations analyzed through multiple linear regression using SPSS version 26. Statistical analysis reveals that net working capital and cash conversion cycle demonstrate significant positive effects on cash holding levels, whereas investment opportunity set exhibits positive but statistically insignificant influence. Collectively, these variables account for 29.4% of cash holding variations, with the remaining 70.6% attributable to factors beyond this analytical framework. These findings provide valuable insights for corporate treasury management and liquidity optimization strategies.