LAUSR

Abstract We examine the impact of a firm's chemical releases (an objective measure of environmental performance) on its cash holdings. The corporate social responsibility (precautionary) motive of cash holdings suggests a negative (positive) relation between chemical releases and cash holdings. Using a 27-year sample with 574 unique firms and 9748 observations, we find a significant and negative relation between chemical releases and cash holdings, suggesting that firms releasing more chemicals hold less cash. Our results are robust to changes analysis, instrumental variable two-stage regression, and other additional tests.