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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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    Cited by:

    1. Khadija S. Almaghrabi, 2025. "Climate Change Exposure and the Readability of Narrative Disclosures in Annual Reports," Sustainability, MDPI, vol. 17(11), pages 1-18, June.
    2. Goodell, John W. & Gurdgiev, Constantin & Karim, Sitara & Palma, Alessia, 2024. "Carbon emissions and liquidity management," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    3. Mengjun Huo & Chao Li & Renhuai Liu, 2024. "Climate policy uncertainty and corporate green innovation performance: From the perspectives of organizational inertia and management internal characteristics," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(1), pages 34-53, January.
    4. Ahmad, Muhammad Farooq & Karpuz, Ahmet, 2024. "Beyond climate change risk: Biodiversity and corporate cash holdings," Economics Letters, Elsevier, vol. 236(C).
    5. Jiaxin Wang & Jingyi Zhuang & Chao Yan & Kam C. Chan, 2025. "Standing Up or Standing By: Abnormally Hot Temperatures and Corporate Environmental Engagement," Journal of Business Ethics, Springer, vol. 196(1), pages 93-127, January.
    6. Goodell, John W. & Palma, Alessia & Paltrinieri, Andrea & Piserà, Stefano, 2025. "Firm-level climate change risk and corporate debt maturity," Journal of International Money and Finance, Elsevier, vol. 152(C).
    7. Huynh, Nhan & Le, Quynh Nga, 2025. "From chain to capital: Supply chain risks and working capital management," Economics Letters, Elsevier, vol. 247(C).
    8. Akhtaruzzaman, Md & Boubaker, Sabri & Gamage, Pandula & Obeng, Victoria, 2025. "Environmental innovation and climate risk awareness: The moderating role of SDG13," Research in International Business and Finance, Elsevier, vol. 75(C).

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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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