Cash holding, type of ownership and firm performance: An empirical study Indonesia
List of Authors
  • Dian Rizandi , Ismawati

Keyword
  • cash holding, firm performance, foreign institutional ownership

Abstract
  • This study aims to examine the effect of foreign institutional ownership on cash holding rates and test the impact of foreign institutional ownership on firm performance. The data in this study used a sample of 165 non-financial companies listed on the IDX and had a proportion of foreign institutional ownership of more than 1% during the period 2016 - 2021. This research uses quantitative methods. Sources and types of data, this study uses secondary data on financial statements obtained from the Bvd Osiris database and KSEI. The data is processed into panel data by choosing the best model of common effect, fixed effect, and random effect. The best model in this study is the fixed effect model. This research conducted a robustness test using the lag factor on the independent variable. The results of this study show that foreign institutional ownership significantly negatively affects the company's cash holding rate. The results of subsequent studies showed that foreign institutional ownership positively affects firm performance.

Reference
  • 1. Bena, J., Ferreira, M. A., Matos, P., & Pires, P. (2017). Are foreign investors locusts? The long-term effects of foreign institutional ownership. Journal of Financial Economics, 126(1), 122–146. https://doi.org/10.1016/j.jfineco.2017.07.005

    2. Bodie, Z., Kane, A., & Marcus, A. J. (2018). Investments (Eleventh). New York: McGrawHill Education.

    3. Brigham, E. F., & Ehrhardt, M. C. (2017). Financial Management - Theory and Practice, 15e. Cengage Learning, 1221.

    4. Ferreira, M. A., & Matos, P. (2008). The colors of investors’ money: The role of institutional investors around the world. Journal of Financial Economics, 88(3), 499–533. https://doi.org/10.1016/j.jfineco.2007.07.003

    5. FitchRatings. (2022). Fitch Affirms Indonesia at “BBB”; Outlook Stable. Fitchratings.Com. https://www.fitchratings.com/research/sovereigns/fitch-affirms-indonesia-at-bbb-outlook-stable-28-06-2022

    6. Gill, A., & Shah, C. (2011). Determinants of Corporate Cash Holdings: Evidence from Canada. International Journal of Economics and Finance, 4(1). https://doi.org/10.5539/ijef.v4n1p70

    7. Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. Corporate Governance: Values, Ethics and Leadership, 77–132. https://doi.org/10.4159/9780674274051-006

    8. Lin, Y. R., & Fu, X. M. (2017). Does institutional ownership influence firm performance? Evidence from China. International Review of Economics and Finance, 49(January), 17–57. https://doi.org/10.1016/j.iref.2017.01.021

    9. Loncan, T. (2020). Foreign institutional ownership and corporate cash holdings: Evidence from emerging economies. International Review of Financial Analysis, 71(November 2018), 101295. https://doi.org/10.1016/j.irfa.2018.12.003

    10. Riddick, L. A., & Whited, T. M. (2009). The corporate propensity to save. The Journal of Finance, 64(4), 1729–1766.

    11. Schumpeter, J. A., & Keynes, J. M. (1936). The General Theory of Employment, Interest and Money. Journal of the American Statistical Association, 31(196), 791. https://doi.org/10.2307/2278703

    12. Tandelilin, E. (2010). Portofolio dan Investasi: Teori dan aplikasi. Kanisius.

    13. Ward, C., Yin, C., & Zeng, Y. (2018). Institutional investor monitoring motivation and the marginal value of cash. Journal of Corporate Finance, 48, 49–75.