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Climate risk and deployment of corporate resources to working capital

Author

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  • Ahmad, Muhammad Farooq
  • Aktas, Nihat
  • Croci, Ettore

Abstract

Using a large sample of US listed firms, we find that exposure to climate risk is negatively associated with working capital. This effect is accentuated in carbon-intensive industries and firms facing financial difficulties. These findings suggest that climate risk pressures firms to release unnecessary resources allocated to working capital, a result consistent with the disciplinary channel.

Suggested Citation

  • Ahmad, Muhammad Farooq & Aktas, Nihat & Croci, Ettore, 2023. "Climate risk and deployment of corporate resources to working capital," Economics Letters, Elsevier, vol. 224(C).
    • Handle: RePEc:eee:ecolet:v:224:y:2023:i:c:s0165176523000277
    DOI: 10.1016/j.econlet.2023.111002
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    References listed on IDEAS

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    More about this item

    Keywords

    Climate risk; Working capital; Carbon intensity; Financial difficulty;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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