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Carbon emissions and abnormal cash holdings

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  • Abu Amin
  • Ashrafee T. Hossain
  • Abdullah‐Al Masum

Abstract

We find that companies that emit high levels of carbon tend to have lower abnormal cash holdings. We have run a battery of endogeneity tests to ensure the robustness of our findings. Our further analysis revealed that weaker internal governance, higher information asymmetry and CEO overconfidence contribute to the heterogeneity of the results. Additionally, we notice that polluting firms prefer to spend more on capital investments while allocating less toward dividends and R&D activities. Our results are consistent with agency theory, indicating that managerial preference for suboptimal investment and/or avoidance of external disciplining might contribute to lower abnormal cash holdings.

Suggested Citation

  • Abu Amin & Ashrafee T. Hossain & Abdullah‐Al Masum, 2024. "Carbon emissions and abnormal cash holdings," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 3175-3209, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:4:p:3175-3209
    DOI: 10.1111/acfi.13249
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