Climate change exposure, risk management and corporate social responsibility: Cross-country evidence

William Mbanyele and Linda Tinofirei Muchenje

Journal of Multinational Financial Management, 2022, vol. 66, issue C

Abstract: We examine how climate change risk impacts corporate social responsibility using an international firm-level sample. Exploiting a new firm-level measure of climate change risk, we find that firms significantly adjust their CSR standards upwards in response to climate change risk shocks. Using the difference in difference (DiD) approach and natural disaster shocks as plausibly exogenous shocks to climate change risk, we document an increase in CSR performance for affected firms relative to their unaffected peers after severe natural disasters. Additionally, we observe that the sensitivity of CSR performance to climate change risk jumps after the release of the Stern Review and the Paris Agreement. Furthermore, we find that this impact is more pronounced for firms in climate-sensitive sectors, firms with more growth options, firms with higher governance standards, and firms in highly competitive industries. Overall, our findings reveal that climate change uncertainty can trigger firms to invest more in CSR activities to hedge against regulatory and physical risks.

Keywords: Climate change; Corporate social responsibility; Real option, Growth option; Paris Agreement (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042444X22000421
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:mulfin:v:66:y:2022:i:c:s1042444x22000421

DOI: 10.1016/j.mulfin.2022.100771

Access Statistics for this article

Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth

More articles in Journal of Multinational Financial Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().