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Chemical releases and corporate cash holdings

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  • Huang, Henry He
  • Liu, Chanjuan
  • Sun, Li

Abstract

We examine the impact of a firm's chemical releases (an objective measure of environmental performance) on its cash holdings. The corporate social responsibility (precautionary) motive of cash holdings suggests a negative (positive) relation between chemical releases and cash holdings. Using a 27-year sample with 574 unique firms and 9748 observations, we find a significant and negative relation between chemical releases and cash holdings, suggesting that firms releasing more chemicals hold less cash. Our results are robust to changes analysis, instrumental variable two-stage regression, and other additional tests.

Suggested Citation

  • Huang, Henry He & Liu, Chanjuan & Sun, Li, 2019. "Chemical releases and corporate cash holdings," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 159-173.
    • Handle: RePEc:eee:finana:v:64:y:2019:i:c:p:159-173
    DOI: 10.1016/j.irfa.2019.05.004
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    More about this item

    Keywords

    Chemical releases; Cash holdings; Environmental Protection Agency (EPA); Toxics Release Inventory (TRI);
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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