Climate transition and the speed of leverage adjustment

Maurizio Dallocchio, D’Ercole, Francesco, Domenico Frascati and Massimo Mariani

International Review of Financial Analysis, 2025, vol. 102, issue C

Abstract: This study examines the entanglement between firms’ climate change exposure and corporate capital structure decisions. In a sample of publicly listed firms on the S&P 1200 Global from 2010 to 2022, the results indicate that companies at the forefront of the transition to a low-carbon economy experience a higher speed of leverage adjustment. Notably, the analysis reveals an asymmetric speed of leverage adjustment when comparing the effect of climate change exposure on over-leveraged and under-leveraged firms. The results underscore the significance of equity capital in fostering the transition to a low-carbon economy and the pivotal role of regulatory bodies in facilitating corporate access to finance climate-friendly investments.

Keywords: Speed of adjustment; Climate risk; Capital structure; Dynamic trade–off theory (search for similar items in EconPapers)
JEL-codes: G30 G32 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521925001139
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:finana:v:102:y:2025:i:c:s1057521925001139

DOI: 10.1016/j.irfa.2025.104026

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().