Biodiversity Risk and Liquidity in Global Tourism Firms

This paper examines how biodiversity risk influences liquidity in global tourism firms and how institutional environments shape this relationship. Using a panel of 1,247 firm-year observations across 27 countries from 2000 to 2022, we find that biodiversity risk is positively associated with firms’ cash holdings, consistent with a precautionary liquidity motive under ecological uncertainty. Dynamic panel data specifications confirm persistence in cash policies. We further observe that business regulations and the freedom to enter markets significantly strengthen this relationship, indicating that institutional quality amplifies firms’ precautionary responses to biodiversity risk. These findings are robust across alternative specifications, subsamples, and liquidity measures. Theoretically, the paper extends the precautionary motive for cash by incorporating biodiversity risk and institutional moderation. Practically, the results highlight the importance of regulatory design and market structure in shaping how tourism firms manage liquidity under environmental pressures.