Financial performance, corporate governance, and political connection for corporate cash holding

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Abstract

This study examines corporate cash holding through the lens of the four motives in Keynesian theory (Schumpeter & Keynes, 1936): 1) transactions, 2) caution, 3) taxes, and 4) agency, (Roy, 2018). It explores the influence of financial performance, corporate governance, and political connections on cash holding, with political connections serving as a mediating factor. The research employs quantitative methods grounded in the philosophy of positivism, focusing on a specific population of 105 companies, with a final sample of 735 observations. The findings suggest that audit committees, current ratios, quick ratios, and political connections play a role in improving cash holding. The study concludes that financial performance, corporate governance, and political connections significantly impact cash holding. While financial performance and governance influence the formation of political connections, political connections do not mediate the relationship between financial performance, corporate governance, and cash holding. This study highlights the importance of liquidity and the interaction between political, debt, and asset connections in achieving corporate objectives. The dynamics of financial performance, corporate governance, and political connections are crucial to public interest.

Keywords: Financial Performance, Corporate Governance, Corporate Cash Holding, Political Connection

Authors’ individual contribution: Conceptualization — C.H., A.I.H., and L.U.; Methodology — L.U. and N.S.; Writing — Original Draft — C.H., A.I.H., L.U., and N.S.; Writing — Review & Editing — C.H. and N.S.; Supervision — A.I.H. and L.U.; Project Administration — C.H. and N.S.; Funding Acquisition — C.H. and A.I.H.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G30, G34, M42, D72

Received: 24.11.2024
Revised: 06.03.2025; 08.04.2025; 24.07.2025
Accepted: 25.08.2025
Published online: 29.08.2025

How to cite this paper: Husadha, C., Hasanuddin, A. I., Uzliawati, L., & Soleha, N. (2025). Financial performance, corporate governance, and political connection for corporate cash holding. Journal of Governance & Regulation, 14(3), 182–193. https://doi.org/10.22495/jgrv14i3art17