IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v71y2025ics1544612324014430.html
   My bibliography  Save this article

Biodiversity risk and firm efficiency

Author

Listed:
  • Li, Yulin
  • Liu, Xiaohui
  • Canil, Jean
  • Cheong, Chee Seng

Abstract

This study examines the impact of biodiversity risk exposure on firm efficiency. Analyzing 23,750 firm-year observations from 2001 to 2020, we identify a significant negative relationship between biodiversity risk and firm efficiency. Our research indicates that increased external financing needs and higher capital costs, driven by biodiversity risk, are key channels contributing to reduced firm efficiency. Firms with higher biodiversity risk exposure demonstrate lower efficiency, especially those with greater idiosyncratic volatility. These findings highlight the economic costs and operational challenges posed by biodiversity risk, offering new insights into its direct impact on firm efficiency.

Suggested Citation

  • Li, Yulin & Liu, Xiaohui & Canil, Jean & Cheong, Chee Seng, 2025. "Biodiversity risk and firm efficiency," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014430
    DOI: 10.1016/j.frl.2024.106414
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324014430
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.106414?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(1), pages 25-46, January.
    2. Seo, Hojun, 2021. "Peer effects in corporate disclosure decisions," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    3. Ma, Feng & Wu, Hanlin & Zeng, Qing, 2024. "Biodiversity and stock returns," International Review of Financial Analysis, Elsevier, vol. 95(PA).
    4. Ahmad, Muhammad Farooq & Karpuz, Ahmet, 2024. "Beyond climate change risk: Biodiversity and corporate cash holdings," Economics Letters, Elsevier, vol. 236(C).
    5. Peter Demerjian & Baruch Lev & Sarah McVay, 2012. "Quantifying Managerial Ability: A New Measure and Validity Tests," Management Science, INFORMS, vol. 58(7), pages 1229-1248, July.
    6. Christopher S. Armstrong & Alan D. Jagolinzer & David F. Larcker, 2010. "Chief Executive Officer Equity Incentives and Accounting Irregularities," Journal of Accounting Research, Wiley Blackwell, vol. 48(2), pages 225-271, May.
    7. Liang, Chao & Yang, Jinyu & Shen, Lihua & Dong, Dayong, 2024. "The role of biodiversity risk in stock price crashes," Finance Research Letters, Elsevier, vol. 67(PA).
    8. Mark P. Sharfman & Chitru S. Fernando, 2008. "Environmental risk management and the cost of capital," Strategic Management Journal, Wiley Blackwell, vol. 29(6), pages 569-592, June.
    9. Gordon, Lawrence A. & Loeb, Martin P. & Tseng, Chih-Yang, 2009. "Enterprise risk management and firm performance: A contingency perspective," Journal of Accounting and Public Policy, Elsevier, vol. 28(4), pages 301-327, July.
    10. Kalhoro, Muhammad Ramzan & Kyaw, Khine, 2024. "Manage biodiversity risk exposure?," Finance Research Letters, Elsevier, vol. 61(C).
    11. Zhanhui Chen & Ralitsa Petkova, 2012. "Does Idiosyncratic Volatility Proxy for Risk Exposure?," The Review of Financial Studies, Society for Financial Studies, vol. 25(9), pages 2745-2787.
    12. Huang, Xuerong (Sharon) & Sun, Li, 2017. "Managerial ability and real earnings management," Advances in accounting, Elsevier, vol. 39(C), pages 91-104.
    13. Al Mamun, Md & Balachandran, Balasingham & Duong, Huu Nhan, 2020. "Powerful CEOs and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 62(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Griffin, Paul A. & Hong, Hyun A. & Liu, Yun & Ryou, Ji Woo, 2021. "The dark side of CEO social capital: Evidence from real earnings management and future operating performance," Journal of Corporate Finance, Elsevier, vol. 68(C).
    2. Bu, Jun & Fei, Tianlun & Zhou, Futong, 2024. "United we stand, divided we fall: The impact of top management team stability on corporate litigation," International Review of Financial Analysis, Elsevier, vol. 96(PB).
    3. Bhandari, Avishek & Golden, Joanna, 2021. "CEO political preference and credit ratings," Journal of Corporate Finance, Elsevier, vol. 68(C).
    4. Jongwon Park & Sunyoung Kim & Albert Tsang, 2023. "CEO Personal Hedging and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 182(1), pages 199-221, January.
    5. Natalie Kyung Won Kim & Sera Choi & Taejin Jung & Sohee Park, 2023. "How does demand uncertainty from climate change exposure affect the firms' cost structures? Examining the real effects of climate change on the firms' operational decisions," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 2969-2989, November.
    6. Baron, Opher & Callen, Jeffrey L. & Segal, Dan, 2023. "Does the bullwhip matter economically? A cross-sectional firm-level analysis," International Journal of Production Economics, Elsevier, vol. 259(C).
    7. Samuel B. Bonsall & Brian P. Miller, 2017. "The impact of narrative disclosure readability on bond ratings and the cost of debt," Review of Accounting Studies, Springer, vol. 22(2), pages 608-643, June.
    8. Rita Lamboglia & Francesco Paolone & Daniela Mancini, 2019. "Determinants of the implementation of environmental risk indicators: Empirical evidence from the Italian manufacturing context," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(2), pages 307-316, March.
    9. Zuo, Jingjing & Qiu, Baoyin & Zhu, Guoyiming & Lei, Guangyong, 2023. "Local speculative culture and stock price crash risk," Research in International Business and Finance, Elsevier, vol. 64(C).
    10. Chowdhury, Hasibul & Rahman, Shofiqur, 2023. "Do tournament incentives affect corporate dividend policy?," Journal of Banking & Finance, Elsevier, vol. 152(C).
    11. Gurmeet S. Bhabra & Harjeet S. Bhabra & Ashrafee T. Hossain, 2022. "CEO inside debt and the acquisition of private targets," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2163-2202, June.
    12. Efstathios Magerakis & Ahsan Habib, 2022. "Environmental uncertainty and corporate cash holdings: The moderating role of CEO ability," International Review of Finance, International Review of Finance Ltd., vol. 22(3), pages 402-432, September.
    13. El Diri, Malek & Lambrinoudakis, Costas & Alhadab, Mohammad, 2020. "Corporate governance and earnings management in concentrated markets," Journal of Business Research, Elsevier, vol. 108(C), pages 291-306.
    14. Leila Zbib & Kourosh Amirkhani & Douglas Fairhurst, 2024. "Chalk it up to experience: CEO general ability and earnings management," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 1007-1036, April.
    15. Bäumer, Marcus, 2020. "What matters to investment professionals in decision making? The role of soft factors in stock selection," EIKV-Schriftenreihe zum Wissens- und Wertemanagement, European Institute for Knowledge & Value Management (EIKV), Luxembourg, volume 44, number 44, December.
    16. Pham, Man Duy (Marty) & Nguyen, Thu Ha, 2024. "When a gift resembles a trojan horse: CEO stock gift and stock price crash risk," The British Accounting Review, Elsevier, vol. 56(4).
    17. Jenna J. Burke, 2022. "Do Boards Take Environmental, Social, and Governance Issues Seriously? Evidence from Media Coverage and CEO Dismissals," Journal of Business Ethics, Springer, vol. 176(4), pages 647-671, April.
    18. Jia, Jing & Li, Zhongtian, 2024. "Opioid abuse and labor investment efficiency," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1267-1285.
    19. Lin, Feng-Yi & Guan, Liming & Ho, Chia-Ling & Wang, Teng-Shih, 2022. "Examining the D&O insurance effect on managerial ability," Finance Research Letters, Elsevier, vol. 46(PA).
    20. Zhao, Rui & Zhang, Dayong & Guo, Mengmeng, 2024. "Do natural disasters affect stock price crash risk? Evidence from emerging markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 93(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014430. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.