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The effects of decarbonization on corporate cash holdings

Author

Listed:
  • Wu, Zhenshu
  • Shih, Yi-Cheng
  • Wang, Yao
  • Zhong, Rui

Abstract

This study documents that high‑carbon emitters increase cash holdings by approximately 2.6% (7.9%) on average compared with low-carbon emitters after the implementation of the Paris Agreement (or the initiation of regional emission trading scheme pilots). High-carbon emitters with stronger external financial constraints and more volatile cash flows tends to hold more cash for precautionary motives. Further, cash flow is more valuable for high-carbon emitters after the implementation of decarbonization policies and increased net investing cash flow provides cash for high-carbon emitters in response to decarbonization. Additionally, high-carbon emitters conduct a green transition to reduce carbon emissions.

Suggested Citation

  • Wu, Zhenshu & Shih, Yi-Cheng & Wang, Yao & Zhong, Rui, 2025. "The effects of decarbonization on corporate cash holdings," Emerging Markets Review, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:ememar:v:69:y:2025:i:c:s1566014125001050
    DOI: 10.1016/j.ememar.2025.101356
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    Keywords

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    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
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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