Pressure‐Driven Cash Holdings Under Biodiversity Risk

ABSTRACT This study examines how biodiversity risk affects corporate cash holdings and the mechanisms shaping this relationship. We find that firms facing higher biodiversity risk significantly increase cash reserves. Internal CSR governance and external institutional pressures both reinforce precautionary cash policies, highlighting the importance of internal capabilities and external pressures. The increase in cash is sourced primarily from reductions in discretionary spending rather than external financing. Higher cash reserves mitigate the adverse effects of biodiversity risk, helping firms preserve financial performance, mitigate uncertainty, and maintain ESG commitments. Overall, our results underscore the precautionary nature of corporate cash management under biodiversity pressures.