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Cash-rich firms and carbon emissions

Md Samsul Alam, Md Safiullah and Md Shahidul Islam

International Review of Financial Analysis, 2022, vol. 81, issue C

Abstract: We investigate whether corporate cash holdings affect carbon dioxide emissions. Using a sample of 5402 firm-years observations from 943 U.S. firms during 2007–2017, we find that carbon emissions are lower in firms with higher corporate cash holdings. The effect of cash holdings on carbon emissions is more pronounced in firms with low leverage and less financial constraints. Our channel analysis further unveils that renewable energy consumption and carbon abatement investment are higher in cash-rich firms, which transmit lower carbon emissions. Our findings are robust to different identification strategies and alternative measures of cash holdings and carbon emissions. Overall, our paper provides novel evidence on the role of corporate cash holdings in mitigating carbon emissions.

Keywords: Cash holdings; Carbon emissions; Renewable energy consumption; Carbon abatement investment (search for similar items in EconPapers)
JEL-codes: G30 G32 M14 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.irfa.2022.102106

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