Biodiversity risk and firm efficiency

Yulin Li, Xiaohui Liu, Jean Canil and Chee Seng Cheong

Finance Research Letters, 2025, vol. 71, issue C

Abstract: This study examines the impact of biodiversity risk exposure on firm efficiency. Analyzing 23,750 firm-year observations from 2001 to 2020, we identify a significant negative relationship between biodiversity risk and firm efficiency. Our research indicates that increased external financing needs and higher capital costs, driven by biodiversity risk, are key channels contributing to reduced firm efficiency. Firms with higher biodiversity risk exposure demonstrate lower efficiency, especially those with greater idiosyncratic volatility. These findings highlight the economic costs and operational challenges posed by biodiversity risk, offering new insights into its direct impact on firm efficiency.

Keywords: Biodiversity risk; Firm efficiency; External financing needs; Capital costs (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014430

DOI: 10.1016/j.frl.2024.106414

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