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Environmental performance and corporate cash holdings

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  • Joel Harper
  • Li Sun

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.

Suggested Citation

  • Joel Harper & Li Sun, 2020. "Environmental performance and corporate cash holdings," Applied Economics Letters, Taylor & Francis Journals, vol. 27(15), pages 1234-1237, September.
    • Handle: RePEc:taf:apeclt:v:27:y:2020:i:15:p:1234-1237
    DOI: 10.1080/13504851.2019.1676381
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    Cited by:

    1. Lucelma Maria dos Santos Cunha & Yuri Gomes Paiva Azevedo & Laís Manfiolli Figueira & Maisa de Souza Ribeiro, 2024. "Effect of the Brazilian corporate sustainability index on cash holdings and the moderating role of Covid‐19," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 4555-4568, September.
    2. Hussaini, Mussa & Hussain, Nazim & Nguyen, Duc Khuong & Rigoni, Ugo, 2021. "Is corporate social responsibility an agency problem? An empirical note from takeovers," Finance Research Letters, Elsevier, vol. 43(C).

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