Carbon emissions and cash holdings in the context of economic indicators

This paper examines how macroeconomic indicators (MEIs) influence the relationship between cash holdings (CH) and carbon dioxide emissions (CO₂) in a sample of GCC firms, addressing a gap in the existing literature. Our results suggest that CH has a positive effect on CO₂. Maintaining a high cash reserve without supervision may give rise to managerial opportunism, indicating private extraction over-investment in environmental performance. However, higher rates of GDP per capita, foreign direct investment, exports, and world governance index negatively moderate our baseline relationships, indicating the mitigation of managerial opportunistic behaviours. In contrast, inflation in consumer prices and energy use intensifies our baseline positive relationships. We show that regulatory frameworks or specific MEIs act as crucial drivers that help firms use their liquid assets to improve their environmental performance. Finally, we report additional analyses, including using various econometric techniques and variables used, to corroborate our baseline results.