Climate Change and Corporate Cash Holdings: Global Evidence
69 Pages Posted: 21 Dec 2020 Last revised: 22 Feb 2022
Date Written: July 24, 2020
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: Suggested Citation