Climate risk and payout flexibility around the world

Yuyuan Chang, Wen He and Lin Mi

Journal of Banking & Finance, 2024, vol. 166, issue C

Abstract: Using a large sample of firms from 45 countries, we find that firms in countries with high-climate risk reduce their cash dividends but increasingly use share repurchases to make payouts. The evidence suggests that firms substitute dividends with repurchases to increase their payout flexibility in response to heightened climate risk. Operating volatility and financial constraints are two channels through which climate risk affects firms’ payout flexibility. Further analysis shows that the effect of climate risk on payout flexibility is more pronounced for firms that are more vulnerable to climate risk, and in countries where people are more concerned about climate risk and the national culture emphasizes uncertainty avoidance and long-term orientation.

Keywords: Climate risk; Payout flexibility; Dividend substitution; Share repurchases; Culture (search for similar items in EconPapers)
JEL-codes: G15 G35 Q54 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:166:y:2024:i:c:s037842662400150x

DOI: 10.1016/j.jbankfin.2024.107233

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