Purpose This study tests the relationship between carbon emissions and corporate cash holdings in terms of 2008 financial crisis in the listed firms of Borsa Istanbul (BIST). Design/methodology/approach This study models Türkiye’s carbon emissions as a function of gross domestic product, per capita energy consumption and per capita carbon emission, utilizing annual data sourced from the official database of the World Bank. The analysis employs the Technique for Order of Preference by Similarity to the Ideal Solution (TOPSIS) and autoregressive integrated moving average with exogenous variables (ARIMAX) model, drawing upon a dataset comprising 1,130 firm-year observations from Türkiye. Findings The TOPSIS results indicate that reductions in per capita CO2 emissions and carbon intensity require firms to minimize cash holdings for transactional purposes, as well as lower debt and trade credit level. In contrast, for firms listed on BIST, improvements in operating cash flow and overall firm performance are essential. These findings underscore the importance for regulators, policymakers and corporate executives to consider the effects of environmental regulation on corporate cash holdings and to develop related policy measures aimed at mitigating the adverse impact of carbon intensity. Furthermore, the ARIMAX results reveal no significant overall relationship between carbon emissions and corporate cash holdings, except in two areas: working capital management, where cash ratios are positively associated, and firm performance, where both return on assets and EBITM margin exhibit significant positive effects in the long run. Practical implications Overall, this study examines new comprehensive evidence from carbon intensity as not only working capital management policy in the firm-specific level but also financial performance factor plays an important role for listed firms’ investment decision-making. Originality/value Prior studies have identified a relationship between carbon emission and cash holding levels, whereas this study investigates how global financial crisis, as an institutional environment factor, influences the value of cash holdings in Türkiye before and after the financial crisis. Our analysis addresses the critical issue of corporate cash holdings, with a particular focus on their implications for carbon emissions as a key sustainability indicator. The motivation for this study stems from growing global concern over climate change and the adverse effects of greenhouse gas emissions arising from economic activities on corporate financial policies, particularly cash holding behavior.
Akgün et al. (Mon,) studied this question.