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Firm-level climate risk exposure and corporate resilience: Evidence from textual analysis

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  • Wang, Yewen
  • Li, Cheng

Abstract

This paper constructs firm-level climate risk indicators using the pre-trained language model FinBERT based on textual data from investor interaction platforms, and empirically examines the impact of climate risk on corporate resilience using data from Chinese A-share listed companies. We find that climate risk significantly undermines corporate resilience through two distinct channels: on the asset side, it weakens profitability, triggering operational distress; on the liability side, it exacerbates financing constraints, leading to financial distress. The combined effect systematically reduces corporate resilience. Further analysis reveals that this adverse impact is more pronounced among firms with weaker cost pass-through capabilities and higher fixed asset growth rates. Importantly, drawing upon financial flexibility theory, we demonstrate that firms can effectively mitigate the negative impact of climate risk on resilience through cash flexibility strategies, such as holding excess cash, and debt flexibility strategies, such as optimizing debt maturity structures.

Suggested Citation

  • Wang, Yewen & Li, Cheng, 2026. "Firm-level climate risk exposure and corporate resilience: Evidence from textual analysis," Economic Modelling, Elsevier, vol. 162(C).
    • Handle: RePEc:eee:ecmode:v:162:y:2026:i:c:s0264999326002105
    DOI: 10.1016/j.econmod.2026.107681
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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
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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