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Is green revenue vanity or sanity? Evidence from corporate cash holdings

Author

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  • Guo, Chenhao
  • Zhong, Rui

Abstract

We construct a novel corporate green revenue dataset in China to investigate the effect of green revenue on corporate cash holdings. We find that firms with a higher percentage of green revenues tend to hold less cash. Economically, a one-standard-deviation increase in green revenue scaled by total revenue leads to a 3.56 % decline in cash holdings scaled by total assets. This negative relationship is more pronounced in firms with high precautionary motive. Additionally, firms with green revenues tend to exercise real options to invest in response to climate change risks, with the necessary cash primarily sourced from external financing activities rather than operating activities. Our findings shed light on the sane effects of green revenue on corporate behaviour.

Suggested Citation

  • Guo, Chenhao & Zhong, Rui, 2025. "Is green revenue vanity or sanity? Evidence from corporate cash holdings," International Review of Financial Analysis, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:finana:v:101:y:2025:i:c:s105752192500105x
    DOI: 10.1016/j.irfa.2025.104018
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    More about this item

    Keywords

    Cash holdings; Green revenues; Climate change; Precautionary motive;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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