Climate risk and asymmetric cost behavior

Kareen Brown, Sohyung Kim, Cheol Lee and Parunchana Pacharn

Advances in accounting, 2025, vol. 68, issue C

Abstract: Prior research indicates that managerial expectations about a firm's future can lead to asymmetric cost behavior or cost stickiness; optimism increases cost stickiness, while pessimism reduces it. We predict and find that firms facing greater climate risk exhibit less cost stickiness, aligning with the threat-rigidity perspective where managers are either reluctant to add new resources or dispose excess ones under high climate risk. This reaction intensifies over time. After the 1997 Kyoto Protocol, cost stickiness is less sticky, reflecting long-term intertemporal changes in managerial perceptions of climate risk and its impact on cost stickiness. In addition, firms in U.S. coastal states, those in agriculturally intensive states, or those financially constrained react more strongly to climate risk. Finally, we find evidence that political environments influence this cost behavior; firms show less cost stickiness under Democratic administrations and in states that vote Democratic.

Keywords: Climate risk; Cost stickiness (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0882611024000531
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:68:y:2025:i:c:s0882611024000531

DOI: 10.1016/j.adiac.2024.100782

Access Statistics for this article

Advances in accounting is currently edited by Dennis Caplan

More articles in Advances in accounting from Elsevier
Bibliographic data for series maintained by Catherine Liu ().