Effect of the Brazilian corporate sustainability index on cash holdings and the moderating role of Covid-19

This study investigates the effect of the Brazilian Corporate Sustainability Index (ISE) on cash holdings and the moderating role of Covid-19. Our sample comprises 213 non-financial publicly listed firms from Brazil with 1072 firm-year observations available on Refinitiv Eikon database from 2015 to 2022. Our overall findings show a positive association between ISE and cash holdings for the entire period analyzed. However, we find that ISE companies retained less cash in the pandemic period. Furthermore, external financial constraint is a channel through which ISE companies tend to lower their levels of cash holdings during the Covid-19 outbreak. Our main results are robust to alternative measures of cash holdings. Therefore, we contribute to the corporate financial, sustainability, and Covid-19 literature by providing the first empirical evidence of the dynamic nature of the relationship between ISE and cash holdings during external shocks and further comprehension to investors that sustainable practices reflected on the financial resource strategies are essential information during crises.