An Analysis of the Role of Profitability as a Mediator of the Effect of Growth Opportunity on Cash Holding Supported by a Test of the Effect of Leverage on Cash Holding

Abstract

This study aims to examine the mediating role of profitability in the relationship between growth opportunity and cash holding, while also examining the effect of leverage on cash holding in transportation and logistics companies listed on the Indonesia Stock Exchange (IDX) during the 2021–2025 period. Cash holding is particularly important in capital intensive industries because firms must balance operational continuity, investment needs, and financial uncertainty. This study employs a quantitative approach using the Partial Least Square Structural Equation Modeling (PLS-SEM) method. The results show that growth opportunity does not have a direct effect on cash holding, but has a positive and significant effect on profitability. Furthermore, profitability measured by ROA has a positive and significant effect on cash holding and mediates the relationship between growth opportunity and cash holding through a full mediation mechanism. Leverage has a negative effect on cash holding. These results highlight that growth opportunity influences cash accumulation only when it is translated into higher profitability, while greater leverage reduces firms’ cash reserves.