The relationship between firm-level climate change exposure, financial integration, cost of capital and investment efficiency

Konstantina K. Agoraki, Maria Giaka, Dimitrios Konstantios and Ioannis Negkakis

Journal of International Money and Finance, 2024, vol. 141, issue C

Abstract: This paper investigates the impactof firm-level climate change exposure on corporate cost of capital, growth opportunities and new investment across 67countries withvarying degrees of financial integration from 2002 to 2021. The analysis documents that firms with high climate change exposure havea negative outlook, face increased cost of capital, and have reduced investment activity. Moreover, firms with climate change exposure are characterised by investment inefficiency and slower speed of adjustment towards the target investment. Thesefindings become more pronounced for companieswhich operate in countrieswith highlevels of financialintegration. Our results are robust to alternative estimation techniques that address model sensitivity, endogeneity, and selection bias issues.

Keywords: Firm level Climate change exposure; Cost of capital; Investment efficiency; Financial integration (search for similar items in EconPapers)
JEL-codes: E22 F36 G30 G32 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:141:y:2024:i:c:s026156062300195x

DOI: 10.1016/j.jimonfin.2023.102994

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