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Investments under Risk: Evidence from Hurricane Strikes

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  • Rajesh Aggarwal
  • Mufaddal Baxamusa

Abstract

We demonstrate that firms with plants in areas subject to a significant hurricane strike reduce their capital expenditures at the hurricane-affected plants and shift capital expenditures to plants in non-hurricane-affected areas. This effect is not present prior to 1997 and only appears from 1997 on. Our evidence is consistent with the possibility that a significant climate event such as the signing of the Kyoto Protocol raised the salience of the perceived risk from actual hurricane strikes and shifted firm behavior.

Suggested Citation

  • Rajesh Aggarwal & Mufaddal Baxamusa, 2025. "Investments under Risk: Evidence from Hurricane Strikes," Working Papers 25-43, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:25-43
    as

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    File URL: https://www2.census.gov/library/working-papers/2025/adrm/ces/CES-WP-25-43.pdf
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    References listed on IDEAS

    as
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    6. Dessaint, Olivier & Matray, Adrien, 2017. "Do managers overreact to salient risks? Evidence from hurricane strikes," Journal of Financial Economics, Elsevier, vol. 126(1), pages 97-121.
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