Firm-level Climate Vulnerability and Corporate Risk-taking: International Evidence

Md Lutfur Rahman and Sudipta Bose
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Md Lutfur Rahman: University of Newcastle
Sudipta Bose: University of Newcastle

No DP-2024-36, Working Papers from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This study examines the association between firm-level climate change risk exposure and corporate risk-taking using a sample of 50,782 firm-year observations from 2003 to 2021 across 58 countries worldwide. Using a time-varying measure of firm-level climate change risk exposure derived from corporate conference call transcripts, we find a negative relationship between firm-level climate change risk exposure and corporate risk-taking. We also find that the negative association is more pronounced for firms with higher environmental innovation and firms domiciled in countries with stakeholder-oriented business cultures and stronger governance. Our key finding is robust under several alternative corporate risk-taking and climate change risk exposure proxies. The findings of this study could be used by policymakers to enact regulations limiting risky investments in climate-vulnerable sectors or to provide economic safety nets for businesses impacted by climate change.

Keywords: Climate change exposure; corporate risk-taking; Asia Pacific countries (search for similar items in EconPapers)
JEL-codes: G32 Q54 (search for similar items in EconPapers)
Date: 2025-03-04
New Economics Papers: this item is included in nep-agr
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