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Climate Sentiment-Induced Stock Liquidity

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Abstract

This paper examines the impact of firm-specific climate change sentiment on stock liquidity using a novel dataset derived from earnings call transcripts of U.S. publicly listed firms. We find that negative sentiment related to regulatory transition risks significantly impairs stock liquidity, while sentiment related to physical risks or green opportunities has limited effects. The impact of negative sentiment is amplified in firms with higher information asymmetry and greater regulatory oversight, such as high litigation risk or substantial government funding. These findings highlight the asymmetric nature of market responses to climate risks and underscore the critical role of institutional context and informational frictions in shaping financial market reactions to climate-related developments.

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  • Kuntal K. Das & Mona Yaghoubi, 2025. "Climate Sentiment-Induced Stock Liquidity," Working Papers in Economics 25/12, University of Canterbury, Department of Economics and Finance.
    • Handle: RePEc:cbt:econwp:25/12
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    File URL: https://repec.canterbury.ac.nz/cbt/econwp/2512.pdf
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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