Corporate Climate Risk: Measurements and Responses
By Qing Li, Hongyu Shan, Yuehua Tang, Vincent Yao. Social Science Research Network, 2020
266 citations recorded by the source corpus.
This paper constructs a novel measure of climate risk at the firm level by adopting a textual analysis method. The measure captures the share of conversations on earnings conference calls that center on climate- and weather-related keywords, allowing us not only to construct a total climate risk measure but also to obtain disaggregated climate risk measures, such as those related to long- versus short-run factors, as well as corporate functions affected by climate risk. We analyze the determinants of firm-level climate risk using natural disasters and firm attributes and find that 60% of its variation is due to within-firm variation, and thus it mostly captures idiosyncratic risk at the firm level. We also examine the relation between climate risk and stock price volatility, as well as firm responses to climate risk. The results suggest that firms with higher unexpected climate risk significantly increase their investment while decreasing their employment in subsequent years.
Subfields: Economics and Econometrics, Finance, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/fef0186b0e1e14d855690e508da1b71bbdf549cf
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- George Skiadopoulos
- Rastin Matin
- Renato Faccini
- Grigory Vilkov
- Ruishen Zhang
- Zacharias Sautner
- Laurence van Lent
- Laura T. Starks
In Finance
- George Skiadopoulos
- Rastin Matin
- Renato Faccini
- Grigory Vilkov
- Ruishen Zhang
- Laurence van Lent
- Zacharias Sautner
- Laura T. Starks
In Strategy and Management
Citations in the corpus
- Dissecting Climate Risks: Are they Reflected in Stock Prices? (2021, result): “climate policy is priced in a pronounced way in the post-2012 period is consistent with previous findings that investors have become aware of climate change risks only in the most recent years (Painter (2020), Bolton and Kacperczyk (2021a), Goldsmith-Pinkham et al.”
- Firm-level Climate Change Exposure (2020, methodology): “Most closely related to our paper, both in terms of research area and methodology, is contemporaneous work by Li et al. (2020).”