Does ESG Influence the Link Between Cash Holdings and Investment Efficiency?

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Contributes evidence on the moderating role of ESG in the cash-investment efficiency relationship, with implications for agency theory in emerging markets.

🏢実務担当者:Highlights that strong ESG practices can mitigate inefficiencies from excess cash holdings, supporting better capital allocation.

🏛政策担当者:Suggests that enhancing ESG disclosure and incentives can improve corporate investment efficiency.

This study examines how corporate cash holdings affect investment efficiency in Saudi-listed firms and whether environmental, social, and governance (ESG) performance changes this relationship. Using panel data from non-financial firms listed on the Saudi Stock Exchange (Tadawul) between 2021 and 2024, the study applies random-effects regression. Investment efficiency is measured following established models, and additional tests are conducted using subsample analyses and an alternative composite measure. The results show that higher cash holdings are linked to greater investment inefficiency, suggesting that excess liquidity may encourage suboptimal investment decisions. However, strong ESG performance weakens this negative effect by improving transparency and accountability, which limits inefficient use of cash. The findings support the relevance of agency and legitimacy theories in the Saudi context and highlight the importance of ESG practices in improving investment outcomes. The study suggests that managers should integrate ESG into long-term strategies, while policymakers should enhance ESG disclosure and incentives to promote more efficient capital allocation.

• semanticscholar https://www.igi-global.com/ViewTitle.aspx?TitleId=410214&isxn=9798337386638first seen 2026-07-18 08:05:54