Abstract
Analysis of cash holding on investment cash flow sensitivity in Indonesia
Highlights
In investing, companies can use internal funding sources and external funding sources
This study aims to contribute to the existing literature on the impact of cash holding and external financing on investment-cash flow sensitivity using the case of Indonesia
After it is known that companies are constrained and unconstraint, a regression is made to compare the effects of cash holding and external financing on cash flow sensitivity
Summary
Companies can use internal funding sources and external funding sources. Myers and Majluf (1984) suggested that companies rely more on internal funding sources because of the high cost of external funding. Regarding funding sources for investment, companies can use external funding sources obtained by issuing bonds, issuing new shares and debt. External sources of funds tend to be used if the company's internal cash is insufficient to invest. Behind the benefits obtained from external funding, there are consequences for the company to bear the costs of internalizing shareholder investment decisions and having an obligation to pay debts. The expensive cost of external capital sources causes companies to increase cash holding in recent decades because of an increase in business risk factors and company motivation in deciding the use of internal funds when investing. The research conducted by Bates et al (2009) showed that the increase in cash holding in 500
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
