Climate Change and Corporate Cash Holdings: Global Evidence

69 Pages Posted: 21 Dec 2020 Last revised: 22 Feb 2022

See all articles by Siamak Javadi

Siamak Javadi

University of Texas - Rio Grande Valley

Abdullah Al Masum

University of Wisconsin - Oshkosh

Mohsen Mollagholamali

Western Kentucky University

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance

Date Written: July 24, 2020

Abstract

Using data from 41 countries, we provide novel empirical evidence that firms’ cash holdings are positively associated with their climate change exposure. This evidence is robust to different model specifications and survives a battery of tests to ease concerns related to spurious correlation and omitted variable bias. Using the release of the Stern Review as an exogenous shock to climate change awareness, we show that this association becomes significantly stronger after the release of the Review and particularly so for firms with higher exposure to regulatory and transition risk dimensions of climate change as well as financially constrained firms.

Keywords: climate change, drought, cash holdings, physical risk, transition risk, regulatory risk

JEL Classification: G15, G32, G38, Q54

Suggested Citation

Javadi, Siamak and Masum, Abdullah Al and Mollagholamali, Mohsen and Rao, Ramesh P., Climate Change and Corporate Cash Holdings: Global Evidence (July 24, 2020). Available at SSRN: https://ssrn.com/abstract=3717092 or http://dx.doi.org/10.2139/ssrn.3717092

Siamak Javadi

University of Texas - Rio Grande Valley ( email )

1201 W. University Dr.
Edinburg, TX 78539
United States

Abdullah Al Masum (Contact Author)

University of Wisconsin - Oshkosh

College of Business
800 Algoma Blvd
Oshkosh, WI 54901
United States

Mohsen Mollagholamali

Western Kentucky University ( email )

Bowling Green, KY 42101
United States

Ramesh P. Rao

Oklahoma State University - Stillwater - Spears School of Business - Department of Finance ( email )

Spears School of Business
Stillwater, OK 74078-4011
United States
405-744-1385 (Phone)
405-744-5180 (Fax)

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