•We investigate the relationship between the enactment of paid maternity leave laws (PML) and corporate cash holdings.•We employ a staggered Difference-in-Differences approach.•We find that the enactment of paid maternity leave laws reduces cash holdings by increasing employee productivity.•The reduction in corporate cash holdings is more pronounced among labor-intensive industries. This study examines whether paid maternity leave laws affect corporate cash holdings. Using a difference-in-differences approach, we find the staggered introduction of these laws significantly reduce firm cash reserves, especially in labor-intensive industries. Further analysis indicates that increased employee productivity post-adoption associates with declining cash holdings, representing a channel linking these laws to precautionary savings motives.