9. Corporate Environmental Responsibility, Cash Holding and Dividend Policy Decisions

The scope of this chapter is to examine the impact of CER related performance on firm dividend and cash holding decisions, by taking into consideration potential endogeneity between the examined factors, evidenced by previous literature on that issue. Empirical analysis suggested that CER performance is positively and significantly impacting on cash holdings, supporting evidence provided on the literature that CER performance lead firms to hold more cash, suggesting that managers of high CER performing firms focus more on maximizing stakeholder value leading to enhanced cash holdings to achieve such goals. Furthermore, we found firms with higher emission and resource use scores are significantly associated with higher cash holdings. Additionally, all environmental performance scores (except for the emission score) proved to have a positive and significant impact on dividends payments. Practically, 1 percentage point increase in CER performance score is associated with 0.2 per cent of dividend to asset ratio, ceteris paribus.