Does climate risk influence analyst forecast accuracy?

Incheol Kim, Suin Lee and Jiwoo Ryou

Journal of Financial Stability, 2024, vol. 75, issue C

Abstract: We examine how climate risk influences analyst forecast accuracy proxied by forecast error and dispersion. Using country-level climate risk estimated with time trends in droughts, we find that analyst forecasts are less accurate for firms in drought-prone countries. This effect of climate risk is stronger when climate risks are denoted in earnings forecasts, and when firms’ home countries have greater reliance on hydroelectric sources in electricity generation, more important agricultural and food industries, and active stances concerning climate change. Overall, our findings suggest noteworthy implications of climate risk on the financial markets via analyst forecast accuracy.

Keywords: Climate risk; Climate change; Earnings forecast; Earnings volatility (search for similar items in EconPapers)
JEL-codes: G20 G24 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:75:y:2024:i:c:s157230892400130x

DOI: 10.1016/j.jfs.2024.101345

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