Liquidity and Earnings: How Cash Holdings Influence Profitability in Southeast Asian Financial Firms

This study examines the relationship between cash holdings and profitability among financial firms across Indonesia, Malaysia, and Singapore. Employing a quantitative approach utilizing secondary data from publicly available financial statements, the research analyzes a comprehensive sample of publicly listed financial institutions from each country. Descriptive statistics and linear regression analyses were conducted to evaluate the impact of cash holdings on firm performance. The empirical findings indicate a positive and statistically significant relationship, demonstrating that cash holdings are strongly associated with profitability. Cross-country comparisons reveal that firms based in Singapore maintain the highest average levels of both cash holdings and profitability, followed by those in Malaysia and Indonesia. These results reinforce the applicability of liquidity management theory, trade-off theory, and the pecking order framework within the Southeast Asian financial sector, while offering practical insights for regulators aiming to enhance financial system resilience through effective liquidity policies.

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