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Does Climate Risk Affect Corporate Financial Performance: Evidence from Türkiye

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  • Şenol Doğan
  • Yakup Söylemez
  • Dilber Doğan

Abstract

Climate risk affects not only living things and nature but also, increasingly, firms. Therefore, quantifying the impacts of climate risk on firms and analyzing their impact on financial performance constitutes an important area of research. In this context, the objective of this study is to investigate the effects of climate risk on corporate financial performance. The research applies climate risk indices developed by Bua et al. (2024) as a proxy for climate change risk. For the purpose of this study, firm data for the BIST Sustainability 25 Index, listed non-financial companies, consisting of a panel data set between 2005 and 2023, is applied. In pursuit of this goal, the System Generalized Method of Moments (System GMM) was used, as it is considered a suitable estimator of dynamic panel data in measuring climate hazard impacts on financial performance. The results of the study show that both physical risk and transition risk have negative effects on corporate financial performance. This study provides important insights for policymakers and enterprises in terms of climate risk and corporate financial performance.

Suggested Citation

  • Şenol Doğan & Yakup Söylemez & Dilber Doğan, 2025. "Does Climate Risk Affect Corporate Financial Performance: Evidence from Türkiye," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 10(SI), pages 336-359.
    • Handle: RePEc:ahs:journl:v:10:y:2025:i:si:p:336-359
    DOI: 10.30784/epfad.1813810
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    References listed on IDEAS

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    1. Giovanna Bua & Daniel Kapp & Federico Ramella & Lavinia Rognone, 2024. "Transition versus physical climate risk pricing in European financial markets: a text-based approach," The European Journal of Finance, Taylor & Francis Journals, vol. 30(17), pages 2076-2110, November.
    2. Li Wang & Hongyu Yang, 2024. "Digital technology innovation and corporate ESG performance: evidence from China," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-32, December.
    3. Yao, Jian & Yang, Cunyi, 2025. "Financial technology and climate risks in the financial market," International Review of Financial Analysis, Elsevier, vol. 99(C).
    4. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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