Does the Carbon Emissions Trading Scheme Affect Corporate Cash Holding Levels? Evidence from China’s A-Share Market

Menglin Li ()
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Menglin Li: Central University of Finance and Economics, School of Finance

A chapter in Proceedings of the 2026 5th International Conference on Big Data Economy and Digital Management (BDEDM 2026), 2026, pp 58-68 from Springer

Abstract: Abstract Leveraging China’s carbon emissions trading scheme (ETS) as a quasi-natural experiment, this study employs a difference-in-differences (DID) design with data from A-share listed firms (2009–2020). Contrary to existing evidence from developed markets, we find that ETS reduces corporate cash holdings, with robustness confirmed by alternative measures and PSM-DID. Heterogeneity analyses show stronger effects for firms with higher financing constraints, higher financial risk, and lower financialization levels, highlighting liquidity vulnerability as a key factor. Our findings uncover contextual heterogeneity in environmental regulation outcomes and provide policymakers with actionable insights for designing differentiated ETS mechanisms in developing economies.

Keywords: carbon emissions trading scheme; DID; cash holding; Porter hypothesis (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-94-6239-640-1_6

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