Does Climate Risk Affect Management Sentiment?

Minfeng Yu, Bingjing Xie, Zeyuan Huang and Mengna Fan

Kyklos, 2025, vol. 78, issue 4, 1440-1456

Abstract: We use extreme weather events as quasi‐natural experiments to examine their impact on management sentiment. Based on a sample of China's A‐share listed companies from 2013 to 2020, we find that managers issue more pessimistic forecasts following climate disasters. Moreover, the impact of climate risk on management forecast pessimism is more pronounced in firms with lower financial flexibility, less‐experienced CEOs, and CEOs with less specialist experience. In addition, economic losses and heightened future uncertainty are the primary drivers of management pessimism after extreme weather events. Further analysis reveals that managers issue more ambiguous earnings forecasts and adopt a more negative tone in the wake of climate disasters.

Date: 2025
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