SME Cash Holdings and Performance in the EU Energy Industry: A Moderating Role of Environmental Performance

Our key research objective in this study is to examine the relationship between cash holdings and firm operating performance in the European context of energy small and medium sized enterprises (SMEs). We focus on the energy industry in which sustainability and environmental responsibility issues are of special interest, but in which context the role of environmental performance on the association between corporate liquidity and SME performance has not yet been studied.A rapidly growing corporate trend in European energy sector in recent years is the number of small and medium sized companies engaged in strategy decision to “go to be green” that has a positive environmental impact. With this trend, given that the business environment is generally considered as complex, firms’ investments in environmental sustainability could potentially affect the cash holding performance relationship. We attempted to find how the level of a country’s environmental performance influences the cash holdings performance relationship. We test our hypothesis with 25,224 firm year observations of European energy SMEs during the period 2008 2015 in 27 countries.