At what cost? Environmental regulation and corporate cash holdings
Anna Alexander,
Antonio De Vito and
Luca Menicacci
Finance Research Letters, 2024, vol. 61, issue C
Abstract:
This paper examines the relation between environmental protection laws and corporate cash holdings. Using a panel of public firms across 31 countries, we show that laws protecting the environment reduce cash holdings, consistent with environmental protection regulations weakening firms’ liquidity positions through heightened operating costs and lower profit margins. In cross-sectional analyses, we document that high-market power firms and firms in countries with lenient anti-tax avoidance rules suffer from cash-holding reductions to a lesser extent. Overall, these findings suggest that environmental protection laws map negatively into firms’ cash balances and shed new light on the economic consequences of environmental laws.
Keywords: Cash holdings; Environmental regulation; Environmental taxes; Cash management; Tax avoidance; Market power (search for similar items in EconPapers)
JEL-codes: G32 G38 H22 H23 K32 M41 Q58 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:61:y:2024:i:c:s1544612323013326
DOI: 10.1016/j.frl.2023.104960
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