Cash Holdings in Shariah-Compliant Firms: Empirical Study

The purpose of this study is to investigate the determinants of cash holdings of Shariah compliant firms, for non-financial corporations in market of the Gulf Cooperation Council (GCC). The analyzed data include non-financial firms listed in of GCC markets over a period 2015–2022. The Idea Ratings database is used to identify Shariah-compliant firms in the GCC. To examine the determinants of cash holdings, liner regression model is used. The results show that, for Shariah-compliant firms, the relevant determinants of cash holdings are capital expenditure, Size, Dividend payments, Liquidity, leverage, growth opportunities and profitability. The findings suggest that the cash holding decisions of Shariah-compliant firms can be best explained using the pecking order theory. This reveals that Shariah-compliant firms use liquid assets as their first financing option, due to the Shariah regulations