Emissions trading scheme participation and firms’ cash holdings

Rilwan Sakariyahu; Rodiat Lawal; Nana Abena Kwansa; Ammar Ahmed; Gbenga Adamolekun

doi:10.1016/j.frl.2023.104565

Emissions trading scheme participation and firms’ cash holdings

Rilwan Sakariyahu, Rodiat Lawal (Lead / Corresponding author), Nana Abena Kwansa, Ammar Ahmed, Gbenga Adamolekun

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Abstract

This study investigates the effect of participating in an emissions trading scheme (ETS) on firms' future cash holdings. Using global firm-level data from different continents, our findings show that, notwithstanding the benefits of ETS, its membership has a significant impact on firms' cash holding. Additionally, we document that bankruptcy risk, firm growth potential, corporation tax, and financial constraints mitigate the impact of ETS on corporate cash holdings. Furthermore, we find that the country of operations, continent, and legal origin of the domiciled firm influence the association between ETS and firm cash holdings level. The results are robust to difference in differences (DiD) estimation and a variety of econometric specifications

Original language	English
Article number	104565
Number of pages	14
Journal	Finance Research Letters
Volume	58
Issue number	Part C
Early online date	8 Oct 2023
DOIs	https://doi.org/10.1016/j.frl.2023.104565
Publication status	Published - Dec 2023

Keywords

Climate Change
Emission Trading Scheme
Cash holdings
Bankruptcy risk
financial constraints
Climate change
Financial constraints
Emission trading scheme

ASJC Scopus subject areas

Finance

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.frl.2023.104565Licence: CC BY

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Cite this

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title = "Emissions trading scheme participation and firms{\textquoteright} cash holdings",

abstract = "This study investigates the effect of participating in an emissions trading scheme (ETS) on firms' future cash holdings. Using global firm-level data from different continents, our findings show that, notwithstanding the benefits of ETS, its membership has a significant impact on firms' cash holding. Additionally, we document that bankruptcy risk, firm growth potential, corporation tax, and financial constraints mitigate the impact of ETS on corporate cash holdings. Furthermore, we find that the country of operations, continent, and legal origin of the domiciled firm influence the association between ETS and firm cash holdings level. The results are robust to difference in differences (DiD) estimation and a variety of econometric specifications",

keywords = "Climate Change, Emission Trading Scheme, Cash holdings, Bankruptcy risk, financial constraints, Climate change, Financial constraints, Emission trading scheme",

author = "Rilwan Sakariyahu and Rodiat Lawal and Kwansa, {Nana Abena} and Ammar Ahmed and Gbenga Adamolekun",

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AU - Sakariyahu, Rilwan

AU - Lawal, Rodiat

AU - Kwansa, Nana Abena

AU - Ahmed, Ammar

AU - Adamolekun, Gbenga

PY - 2023/12

Y1 - 2023/12

N2 - This study investigates the effect of participating in an emissions trading scheme (ETS) on firms' future cash holdings. Using global firm-level data from different continents, our findings show that, notwithstanding the benefits of ETS, its membership has a significant impact on firms' cash holding. Additionally, we document that bankruptcy risk, firm growth potential, corporation tax, and financial constraints mitigate the impact of ETS on corporate cash holdings. Furthermore, we find that the country of operations, continent, and legal origin of the domiciled firm influence the association between ETS and firm cash holdings level. The results are robust to difference in differences (DiD) estimation and a variety of econometric specifications

AB - This study investigates the effect of participating in an emissions trading scheme (ETS) on firms' future cash holdings. Using global firm-level data from different continents, our findings show that, notwithstanding the benefits of ETS, its membership has a significant impact on firms' cash holding. Additionally, we document that bankruptcy risk, firm growth potential, corporation tax, and financial constraints mitigate the impact of ETS on corporate cash holdings. Furthermore, we find that the country of operations, continent, and legal origin of the domiciled firm influence the association between ETS and firm cash holdings level. The results are robust to difference in differences (DiD) estimation and a variety of econometric specifications

KW - Climate Change

KW - Emission Trading Scheme

KW - Cash holdings

KW - Bankruptcy risk

KW - financial constraints

KW - Climate change

KW - Financial constraints

KW - Emission trading scheme

U2 - 10.1016/j.frl.2023.104565

DO - 10.1016/j.frl.2023.104565

M3 - Article

SN - 1544-6123

VL - 58

JO - Finance Research Letters

JF - Finance Research Letters

IS - Part C

M1 - 104565

ER -

Emissions trading scheme participation and firms’ cash holdings

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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