Climate change exposure, shareholder wealth, and the adoption of the Paris agreement: A text-based approach

Pattanaporn Chatjuthamard, Simran Singh, Pornsit Jiraporn and Sang Mook Lee

International Review of Financial Analysis, 2024, vol. 94, issue C

Abstract: Taking advantage of a distinctive measure of firm-specific exposure to climate change derived from sophisticated textual analysis, we examine the effect of climate change exposure on shareholder value using the signing of the Paris climate agreement. We find that companies more exposed to climate change experience more favorable market reactions to the adoption of the agreement. Specifically, a rise in climate change exposure by one standard deviation improves market reactions by 7.3%–8.8%. Further analysis corroborates the results, including propensity score matching, entropy balancing, an instrumental-variable analysis and Oster (2019) assessment of coefficient stability. Notably and somewhat surprisingly, the positive market reactions can be more attributed to the new business opportunities associated with the actions enabled by the Paris agreement than to the reduction in the physical and regulatory risk.

Keywords: Climate change; Climate change exposure; Paris agreement; Event study; Shareholder wealth; Stock market reactions (search for similar items in EconPapers)
JEL-codes: G14 G32 Q54 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105752192400259X
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:94:y:2024:i:c:s105752192400259x

DOI: 10.1016/j.irfa.2024.103327

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 ().