Low-carbon transformation and corporate cash holdings

Abstract

Based on the data of the A-share listed firms in China, this paper studies the relationship between low-carbon transformation and corporate cash holding decisions using a staggered difference-in-differences method (DID) with the implementation of the low-carbon pilot policy. The study finds that the low-carbon transformation reduces firms’ cash holdings. Channel testing documents that the low-carbon transformation reduces financing costs and increases government subsidies. The impact is mainly in firms with higher financial constraints, larger operating burdens and greater environmental concerns. In addition, the negative relationship improves firms’ research and development investment and corporate environmental responsibility.