Robot taxes and corporate cash holdings: evidence from a policy-induced natural experiment

Abstract

This study investigates how the introduction of a robot tax affects corporate cash holdings, using a unique policy implementation in South Korea. Applying a Difference-in-Differences (DID) methodology to financial data from 2626 firm-year observations between 2016 and 2019, we find that the robot tax significantly increased cash holdings among the treatment group compared to the control group. This effect was more pronounced in non-chaebol firms, likely due to their limited financial flexibility and lack of internal capital resources. Additional analyses suggest that market participants reacted negatively to the increased cash reserves, suggesting concerns over reduced investment opportunities or heightened financial uncertainty. This study provides both practical and academic insights into the broader implications of robot tax reforms, particularly in the context of rapid technological advancements and the growing adoption of industrial robotics.