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Title: Environmental regulation and corporate cash holdings: evidence from China’s new Environmental Protection Law
Authors: Zhang, Chao
Cheng, Jinkai
Keywords: Social sciences::Economic theory
Issue Date: 2022
Source: Zhang, C. & Cheng, J. (2022). Environmental regulation and corporate cash holdings: evidence from China’s new Environmental Protection Law. Frontiers in Environmental Science, 10, 835301-.
Journal: Frontiers in Environmental Science
Abstract: Exploiting the 2014 Environmental Protection Law (EPL) in China as quasi-natural experiments, we adopt a difference-in-differences approach to examine the impact of environmental regulation on corporate cash holdings. We document that heavy-polluting firms increase their cash holdings 15% more than non-heavy-polluting firms due to stringent environmental regulation. Further tests show that the heightened environmental uncertainty, the limited access to bank loans, and the decline in obtaining government subsidies for heavy-polluting firms are three plausible channels that allow environmental regulation to increase corporate cash holdings. The effects of environmental regulation on cash holdings are stronger for firms without political backgrounds and those in regions with less dependent on the secondary sector. Overall, our results offer original evidence showing how environmental regulation in emerging economies affects firms’ liquidity management decisions and support the precautionary effect of cash holdings.
ISSN: 2296-665X
DOI: 10.3389/fenvs.2022.835301
Schools: Nanyang Business School 
Rights: © 2022 Zhang and Cheng. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY). The use, distribution or reproduction in other forums is permitted, provided the original author(s) and the copyright owner(s) are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.
Fulltext Permission: open
Fulltext Availability: With Fulltext
Appears in Collections:NBS Journal Articles

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