The effect of corporate environmental responsibility and religiosity on corporate cash holding decisions and profitability: Evidence from the United States' policies for sustainable development

Abstract

We use religious background as a proxy for local risk-taking attitudes and investigate whether geographical variation in religion affects corporate environmental responsibility (CER) with regards to corporate cash policies and profitability. We conjecture that the presence of environmentally conscious firms would be higher in areas with more Catholics relative to Protestants. Study data comprises of the largest publicly traded U.S.-listed firms of Newsweek's green rankings of 2015-2016. We use green scores and the concentration of Catholic to Protestant population ratio as proxies for CER and religiosity, respectively. We provide robust evidence that corporate environmental practices attenuate the demand for precautionary cash reserves to protect firms from unforeseeable risks. Furthermore, environmentally conscious firms located in high risk-taking areas gain financial stability and improve profitability, strengthening their CER. The findings provide contributions to risk management literature and document the importance of firms' efforts to harmonize social behavior for sustainable financial policies.

The religion effect on corporate cash holding in China: Buddhism and Taoism

“…Therefore, the firms' culture and behaviours could be affected by local religious norms and exhibit the attributes of local religious adherents. (El‐Halaby et al, 2021; Tsendsuren et al, 2021). Recently, Alnori et al (2021) find the determinant factors of corporate cash holdings in the Gulf Cooperation Council (GCC).…”

Environmental protection and sustainable development of enterprises in China: The moderating role of media attention

“…Corporate environmental responsibility is an essential requirement for corporate sustainable development and an effective measure to harmonize economic, social, and environmental development and achieve corporate sustainable development (Gangi et al, 2022). Tsendsuren et al (2021) argued that corporate fulfillment of environmental responsibility is beneficial to increase corporate competitiveness and gain stakeholders' support to break through trade and market barriers, thus achieving corporate sustainable development. Enterprises increasingly consider environmental issues as an essential element of strategic management, using it as a driving force to improve the sustainability of enterprises (Anser et al, 2020).…”

The impact of penalties for environmental violations on corporate environmental responsibility

“…Contextual factors are another category of drivers that lead firms to engage in CER practises. They include religion (Du et al, 2014; Tsendsuren, Yadav, Han, & Mun, 2021), market competition (Tsendsuren, Yadav, Han, & Kim, 2021), environmental regulations (Han et al, 2021), the industry to which firms belong (Radhouane et al, 2020) and their geographical location (Husted et al, 2016).…”