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Chemical releases and corporate cash holdings

Henry He Huang, Chanjuan Liu and Li Sun

International Review of Financial Analysis, 2019, vol. 64, issue C, 159-173

Abstract: We examine the impact of a firm's chemical releases (an objective measure of environmental performance) on its cash holdings. The corporate social responsibility (precautionary) motive of cash holdings suggests a negative (positive) relation between chemical releases and cash holdings. Using a 27-year sample with 574 unique firms and 9748 observations, we find a significant and negative relation between chemical releases and cash holdings, suggesting that firms releasing more chemicals hold less cash. Our results are robust to changes analysis, instrumental variable two-stage regression, and other additional tests.

Keywords: Chemical releases; Cash holdings; Environmental Protection Agency (EPA); Toxics Release Inventory (TRI) (search for similar items in EconPapers)
JEL-codes: G30 G39 Q10 (search for similar items in EconPapers)
Date: 2019
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