Cash Holding and Leverage as Determinants of Financial Performance: Evidence from Food and Beverage Companies Listed on the Indonesia Stock Exchange, 2022-2024
DOI:
https://doi.org/10.64137/31079423/IJEBMR-V2I3P114Keywords:
Cash Holding, Leverage, Debt to Asset Ratio, Financial Performance, Return on Assets, Food and Beverage Industry, Panel Data RegressionAbstract
The post-pandemic recovery period confronted Indonesian food and beverage companies with a distinctive combination of recovering demand and elevated input, energy, and financing costs, sharpening the practical importance of corporate liquidity and capital-structure decisions for sustaining profitability. This study empirically examined the partial and simultaneous effects of cash holding and leverage, proxied by the Debt to Asset Ratio (DAR), on financial performance, proxied by Return on Assets (ROA), among food and beverage sub-sector companies listed on the Indonesia Stock Exchange (IDX). From an initial population of 178 listed manufacturing companies, six food and beverage companies with complete, consecutively audited financial statements for the 2022–2024 period were selected through purposive, criterion-based sampling (PT Mayora Indah Tbk, PT Multi Bintang Indonesia Tbk, PT Nippon Indosari Corpindo Tbk, PT Tri Banyan Tirta Tbk, PT Ultrajaya Milk Industry and Trading Company Tbk, and PT Wilmar Cahaya Indonesia Tbk), yielding 18 firm-year panel observations. Secondary data drawn from published annual financial statements were analyzed using multiple linear regression in STATA. The estimated model was ROA = −8.588 + 0.852(Cash Holding) + 0.173(Leverage) + ε. Partial (t-test) results indicated that cash holding exerted a positive and statistically significant effect on financial performance (t = 5.191, p = 0.0001), and leverage likewise exerted a positive and statistically significant effect (t = 2.283, p = 0.037). The simultaneous (F-test) result confirmed that cash holding and leverage jointly and significantly predicted financial performance (F = 13.530, p = 0.0004), with the model explaining 64.3 percent of the variance in ROA (R² = 0.643; adjusted R² = 0.596). These findings indicate that, within this sample and period, adequate cash reserves enhanced operational flexibility and reduced dependence on external financing, while debt was employed at a level that remained productive, consistent with tax-shield benefits under trade-off theory rather than the financial distress predicted at excessive leverage levels. The results carry practical implications for corporate treasury policy, investment analysis, and capital-market oversight, while the study's modest sample size, short observation window, and single-sector, purposively selected design indicate that its findings should be generalized with appropriate caution pending replication on larger, more diverse, and longer panel datasets.
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