Impact of Religiosity on Cash Holdings: Case Study of Islam

Abstract

The rationale behind the study is to scrutinize the impact and gauge the extent to which liquidity; cash flows, leverage, size, dividend payments, Islam, cash flow, variability and Market to Book ratio affect the cash holdings of corporate organizations. This study is important in the Islamic perspective which is going to check the impact of these variables on cash holdings when credit based financing is restricted to a specific extent and the main focus is on the cash based financing modes. 313 companies listed at Karachi Stock Exchange have been selected to inspect the association. The financial data of 5 years have been taken into account i.e. 2006-2011.Panel data estimation models like common effect model, random effect model and Haussmann test is applied to conduct the analysis. The results showed the significant positive relationship of all variables with cash holdings in Islamic roles follower firms of Pakistan. Islamic roles which is taken in our paper for study is basically based on a two criteria issued for a firms to be Islamic, was that they must have the interest bearing ratio should be less than 37% and the Non compliance investment to assets ratio should be less than 33%.. The study will help the investors and financial analysts to understand the factors of liquidity contributing towards cash holdings in Pakistani firms.