China's new environmental protection law: Implications for mineral resource policy, environmental precaution and green finance

Abstract

This study investigates the impact of the new Environmental Protection Law on the cash-holding behavior of polluting firms, utilizing samples of A-share listed companies from the China Stock Market & Accounting Research Database. The findings reveal that polluting firms exhibit more substantial precautionary incentives to hold cash under stringent environmental regulations, indicating their awareness of green financial innovations. The robust analyses confirm the soundness of the conclusions. The heterogeneity results suggest that non-state-owned, non-politically-affiliated, and large firms exhibit more substantial precautionary incentives to hold cash. The mechanism tests indicate that firms may increase cash holdings by aggressively reducing investment or substituting long-term borrowing with cash holdings. However, the study finds that solid environmental regulatory policies do not significantly affect short-term corporate borrowing, indicating that ecological legislation stabilizes long-term impact. Drawing from these findings, this paper offers targeted policy recommendations to enhance the sustainable development of mineral resources.