Corporate cash holdings in response to climate risk and policies

Sang Ho Lee, Daewoung Joey Choi and Seung Hun Han

Finance Research Letters, 2023, vol. 55, issue PA

Abstract: This study examines the effect of state energy policies on corporate cash holdings, focusing on renewable portfolio standards (RPS) as a primary motivating factor driving local companies to hold more cash. Our findings indicate that firms incorporated in states that did not implement RPS tend to hold more cash as they are expected to face increased future climate regulatory risk, in particular around the Paris Agreement. Additional results show that cash demand is higher when firms are incorporated in states dominated by legislatures that do not favor eco-friendly policies.

Keywords: Cash holding; Climate risk; Renewable portfolio standards; Political energy policies (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002829

DOI: 10.1016/j.frl.2023.103910

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