Environmental performance and corporate cash holdings

Joel Harper and Li Sun

Applied Economics Letters, 2020, vol. 27, issue 15, 1234-1237

Abstract: This study examines the impact of environmental performance on corporate cash holdings. Following Cho and Patten (2007), we use ratings of bad environmental activities (i.e. environmental concerns) as the proxy for environmental performance. We rely on the agency motive of corporate cash holdings to predict a negative relation between environmental concerns and the level of cash. Using a 24-year panel sample with 22,724 observations representing 2,787 unique firms, we find that firms with worse environmental performance hold less cash, supporting the agency motive. Our results still hold after a battery of additional tests.

Date: 2020
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DOI: 10.1080/13504851.2019.1676381

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