Does climate policy uncertainty influence corporate cash holdings? Evidence from the U.S. tourism and hospitality sector

Abstract

We examine the influence of climate policy uncertainty (CPU) on corporate cash holding decisions of U.S. tourism and hospitality firms. We find that CPU is negatively associated with corporate cash holdings for tourism and hospitality firms in the United States. A further analysis indicates that the impact of CPU on cash holdings lasts 2 years and disappears afterward. We also show that CPU is negatively associated with corporate cash holdings for hotel firms, but its impacts on airline, restaurant, and casino firms are insignificant. Results from cross-sectional analyses show that financial constraints and climate risk exposure moderate the relationship between CPU and corporate cash holdings. Our main findings are insensitive to additional robustness tests, including an instrumental variable test and subsample analyses. Our results have timely implications for academics, investors, and regulators.