Climate Sentiment-Induced Stock Liquidity

Kuntal K. Das () and Mona Yaghoubi ()
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Kuntal K. Das: University of Canterbury, https://www.canterbury.ac.nz
Mona Yaghoubi: University of Canterbury, https://www.canterbury.ac.nz

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: This paper examines the impact of firm-specific climate change sentiment on stock liquidity using a novel dataset derived from earnings call transcripts of U.S. publicly listed firms. We find that negative sentiment related to regulatory transition risks significantly impairs stock liquidity, while sentiment related to physical risks or green opportunities has limited effects. The impact of negative sentiment is amplified in firms with higher information asymmetry and greater regulatory oversight, such as high litigation risk or substantial government funding. These findings highlight the asymmetric nature of market responses to climate risks and underscore the critical role of institutional context and informational frictions in shaping financial market reactions to climate-related developments.

Keywords: Climate change sentiment; Stock liquidity; Asymmetric information; Regulatory environment (search for similar items in EconPapers)
JEL-codes: G10 G40 Q54 Q58 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2025-09-01
New Economics Papers: this item is included in nep-ene and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:25/12

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