Climate change uncertainty and corporate debt relationship: A quantile panel data analysis

Fredj Jawadi, Philippe Rozin and Abdoulkarim Idi Cheffou

Journal of International Money and Finance, 2025, vol. 154, issue C

Abstract: Is there a link between climate change action and the corporate debt market? Climate concerns are affecting a growing number of firms, their capital demand and indebtedness, as their exposure to ecological transition and climate change risk can influence their capital cost, capital demand and therefore their corporate debt decisions. This study examines the impact of climate change risk/unertainty on corporate debt and tests further lead-lag effects. To this end, we rely on data related to US companies listed on the S&P500 over the period 1990–2024, focusing on a large sample over a timeline characterized by different episodes, crises, and tensions related to climate change. Accordingly, we define the relationship between US corporate debt and climate change uncertainty using linear and nonlinear specifications. Our results show that pressure linked to ecological transition and climate change risk has had a significant impact on US firms’ debt and their capital structure. However, it appears that the impact of climate risks varies depending on the quantile under consideration and therefore the level of firm’s debt, suggesting further evidence of asymmetry and nonlinearity.

Keywords: Climate Risk; Climate change uncertainty; Corporate Debt; Quantile Panel Data Regressions; Nonlinearity (search for similar items in EconPapers)
JEL-codes: C23 G32 G33 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:154:y:2025:i:c:s0261560625000555

DOI: 10.1016/j.jimonfin.2025.103320

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