Does Climate Risk Vulnerability Affect the Value of Excess Cash? International Evidence

Assil Guizani, Hamza Nizar, Faten Lakhal, Taher Hamza and Ramzi Benkraiem ()
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Assil Guizani: OCRE - Observatoire et Centre de Recherche en Entrepreneuriat - EDC - EDC Paris Business School, EDC - EDC Paris Business School
Hamza Nizar: PRESTIGE Labo, IHEC- University of Carthage
Faten Lakhal: PULV - Pôle Universitaire Léonard de Vinci
Taher Hamza: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Ramzi Benkraiem: Audencia Business School

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Abstract: Abstract In this paper, we investigate the impact of climate risk on the value of excess cash. Based on an international sample of 6468 firm-year observations from 2010 to 2019, the results show that climate risk vulnerability positively affects the value of excess cash. This suggests that investors may consider firms with excess cash to be better positioned to challenge extreme weather events by using cash reserves to cover up expenses and maintain operations. This positive effect is more pronounced for firms operating in countries with strong investor protection, for those with strong governance quality, and for those with high corporate social responsibility performance. However, it is less accentuated in the presence of financial constraints. Overall, our findings have significant practical implications for decision-makers, investors, and policymakers.

Date: 2024
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Published in International Journal of Finance and Economics, 2024, pp.ijfe.3035. ⟨10.1002/ijfe.3035⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04846580

DOI: 10.1002/ijfe.3035

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