Diversification and cash holdings: comparison between Indonesia and the Netherlands firms Online publication date: Sun, 23-Jun-2019
by I. Made Sudana; Fahima Budi Imaniar; Nugroho Sasikirono; Sanju Kumar Singh
International Journal of Monetary Economics and Finance (IJMEF), Vol. 12, No. 2, 2019
Abstract: This study examines the relationship between international diversification and cash holdings from 125 non-financial firms in Indonesia and the Netherlands. It also tests the moderation effect of product diversification on the relationship between international diversification and cash holdings. We assigned two OLS analysis models and quantile regressions. The result shows that the relationship between international diversification and cash holdings is negative and significant in both countries. Analysis using quantile regressions show that this relationship only occurs at low-level of cash holdings in Indonesia (Q2 to Q4). The relationship occurs at high-level in the Netherlands (Q8 and Q9). We also find that product diversification weaken the negative relationship of international diversification on cash holdings in Indonesia, but not in the Netherlands. Nevertheless, quantile regressions show that in the Netherlands there are mediating effects at high-level of cash holdings.
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