KEY DETERMINANTS OF CASH RESERVES IN MANUFACTURING FIRMS DURING COVID-19 IN INDONESIA
Cash Holding, COVID-19, Indonesian Stock Exchange, Manufacturing Firm
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Cash Holding, COVID-19, Indonesian Stock Exchange, Manufacturing Firm
Abstract
This study investigates the effects of the COVID-19 pandemic on cash reserves in Indonesian manufacturing companies. The research assesses cash levels before, during, and after the pandemic, and identifies key factors influencing cash holdings. Data from publicly listed manufacturing companies in Indonesia were analyzed, focusing on financial metrics such as earnings before interest, taxes, depreciation, and amortization (EBITDA), sales volatility, and net working capital. The findings reveal significant differences in cash, EBITDA, and sales volatility between the pre-crisis (2018-2019) and crisis periods horizons I (2020-2021) and II (2022). The primary determinants of cash holdings were found to be sensitivity of cash flow, capital expenditure, cash flow volatility, net working capital, and debt levels. These factors are crucial in understanding the impact of the pandemic on cash management in Indonesian manufacturing companies.
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References
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John Bae, Wonik Choi, & Jongha Lim. (2020). Corporate social responsibility: An umbrella or a puddle on a rainy day? Evidence surrounding corporate financial misconduct. European Financial Management, 26(1), 77–117.
Joshi, H. (2022). Do Precautionary Corporate Cash Holdings Help During the Economic Shocks? Evidence from the Covid-19 Pandemic. FIIB Business Review. https://doi.org/10.1177/23197145221110286
Mujiyanto, A. A., & Prijadi, R. (2022). Determinant of cash holdings from Indonesian public non-financial firms during Coronavirus-19 pandemic. In Contemporary Research on Management and Business (pp. 5–8). CRC Press. https://doi.org/10.1201/9781003295952-2
Ntantamis, C., & Zhou, J. (2022). Corporate payout, cash holdings, and the COVID-19 crisis: Evidence from the G-7 countries. Finance Research Letters, 50.
Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52(1), 3–46. https://doi.org/https://doi.org/10.1016/S0304-405X(99)00003-3
Prakash, N., Maheshwari, A., & Hawaldar, A. (2023). The impact of Covid-19 on the capital structure in emerging economies: evidence from India. Asian Journal of Accounting Research, 8(3), 236–249.
Al-Najjar, B. (2013). The financial determinants of corporate cash holdings: Evidence from some emerging markets. International Business Review, 22(1), 77–88. https://doi.org/10.1016/J.IBUSREV.2012.02.004
Bates, T. W., Kahle, K. M., Stulz, R. M., Almeida, H., Campello, M., Deangelo, H., Fama, G., Graham, J., Harvey, C., Lemmon, M., Maxwell, B., Oaxaca, R., & Taillard, J. (n.d.). Why do U.S. firms hold so much more cash than they used to? http://ssrn.com/abstract=927962
Bloom, N., Bond, S., & Reenen, J. (2007). Uncertainty and Investment Dynamics. The Review of Economic Studies, 74(2), 391–415.
Chen, H., & Chen, S. (2012). Investment-cash flow sensitivity cannot be a good measure of financial constraints: Evidence from the time series. Journal of Financial Economics, 103(2), 393–410. https://doi.org/10.1016/j.jfineco.2011.08.009
Cowling, M., Brown, R., & Rocha, A. (2020). Did you save some cash for a rainy COVID-19 day? The crisis and SMEs. International Small Business Journal: Researching Entrepreneurship, 38(7), 593–604. https://doi.org/10.1177/0266242620945102
Duchin, R., Ozbas, O., & Sensoy, B. A. (2010). Costly external finance, corporate investment, and the subprime mortgage credit crisis. Journal of Financial Economics, 97(3), 418–435. https://doi.org/10.1016/j.jfineco.2009.12.008
Falato, A., Goldstein, I., Hortaçsu, A., Choi, J., Haddad, V., Li, Y., Liang, N., Ma, Y., Stein, J., Vissing-Jorgensen, A., Zeng, Y., & Griffin, K. C. (2020). Financial Fragility in the COVID-19 Crisis: The Case of Investment Funds in Corporate Bond Markets. http://www.nber.org/papers/w27559
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics. McGraw-Hil.
Haj-Salem, I., & Hussainey, K. (2021). Risk Disclosure and Corporate Cash Holdings. Journal of Risk and Financial Management, 14(7). https://doi.org/10.3390/jrfm14070328
Han, S., & Qiu, J. (2007). Corporate precautionary cash holdings. Journal of Corporate Finance, 13(1), 43–57. https://doi.org/10.1016/j.jcorpfin.2006.05.002
He, Z., Suardi, S., Wang, K., & Zhao, Y. (2022). Firms’ COVID-19 Pandemic Exposure and Corporate Cash Policy: Evidence from China. Economic Modelling, 116, 105999. https://doi.org/10.1016/J.ECONMOD.2022.105999
Honda, T., & Uesugi, I. (2021). COVID-19 and Precautionary Corporate Cash Holdings: Evidence from Japan ab. http://risk.ier.hit-u.ac.jp/
Honda, T., & Uesugi, I. (2022). COVID-19 and Precautionary Corporate Cash Holdings: Evidence from Japan*. In Japanese Journal of Monetary and Financial Economics (Vol. 10).
Javadi, S., Mollagholamali, M., Nejadmalayeri, A., & Al-Thaqeb, S. (2021). Corporate cash holdings, agency problems, and economic policy uncertainty. International Review of Financial Analysis, 77. https://doi.org/10.1016/j.irfa.2021.101859
John Bae, Wonik Choi, & Jongha Lim. (2020). Corporate social responsibility: An umbrella or a puddle on a rainy day? Evidence surrounding corporate financial misconduct. European Financial Management, 26(1), 77–117.
Joshi, H. (2022). Do Precautionary Corporate Cash Holdings Help During the Economic Shocks? Evidence from the Covid-19 Pandemic. FIIB Business Review. https://doi.org/10.1177/23197145221110286
Mujiyanto, A. A., & Prijadi, R. (2022). Determinant of cash holdings from Indonesian public non-financial firms during Coronavirus-19 pandemic. In Contemporary Research on Management and Business (pp. 5–8). CRC Press. https://doi.org/10.1201/9781003295952-2
Ntantamis, C., & Zhou, J. (2022). Corporate payout, cash holdings, and the COVID-19 crisis: Evidence from the G-7 countries. Finance Research Letters, 50.
Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of Financial Economics, 52(1), 3–46. https://doi.org/https://doi.org/10.1016/S0304-405X(99)00003-3
Prakash, N., Maheshwari, A., & Hawaldar, A. (2023). The impact of Covid-19 on the capital structure in emerging economies: evidence from India. Asian Journal of Accounting Research, 8(3), 236–249.
Published
2025-04-02
How to Cite
Cempaka, S. D., Hakim, M. S., Zharifa, N. Q., Safitri, I., Jauhari, M. H., & Kunaifi, A. (2025). KEY DETERMINANTS OF CASH RESERVES IN MANUFACTURING FIRMS DURING COVID-19 IN INDONESIA: Cash Holding, COVID-19, Indonesian Stock Exchange, Manufacturing Firm. JMD : Jurnal Riset Manajemen & Bisnis Dewantara, 7(2), 61 - 72. https://doi.org/10.26533/jmd.v7i2.1339
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Copyright (c) 2024 Santy Dwi Cempaka, Muhammad Saiful Hakim, Naila Qanita Zharifa, Ika Safitri, Muhammad Haris Jauhari, Aang Kunaifi
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