The Effect of Corporate Environmental, Social and Governance Disclosure on Cash Holdings: Life‐cycle Perspective

This paper examines the impact of corporate environmental, social and governance (ESG) disclosure on cash holdings, specifically during various stages of the firm life cycle of S&P 1500 indexed firms. Using a sample of 9811 firm-year observations from 2006 to 2015, we document a significantly negative relation between ESG disclosure and cash holdings in the introduction, growth and shake-out/decline stages, and those lower cash holdings are associated with higher firm performance and a positive value of cash. Our findings are robust to alternative econometric specifications, alternative measures, additional control variables, propensity score matching and the use of an instrumental variable approach. Overall, our study offers useful insights into the global debate on ESG.