IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/20253069.html
   My bibliography  Save this paper

Local institutional ownership and price discovery around extreme weather events

Author

Listed:
  • Broeders, Dirk
  • Bauer, Rob
  • De Carolis, Flavio

Abstract

In this event study, we analyze the effect of market segmentation on stock returns in Europe amid extreme weather events. We show that local institutional ownership (LIO) mitigates the negative effect of the uncertainty from the occurrence of extreme weather events on stock prices. We assess firms’ exposure to physical climate risks using the Eurosystem’s method that uses physical climate risk indicators. In a sample with materially exposed industries, we find a negative risk-adjusted abnormal return of 99 basis points for storms on the event date. This negative return is mitigated however by 1.3% for each percentage point increase in LIO. We confirm the mitigating role of LIO by testing the information hypothesis through two channels: the distance between a firm’s headquarters and the affected facility and its exposure to physical risk. JEL Classification: C81, G11, G14, G32, Q54

Suggested Citation

  • Broeders, Dirk & Bauer, Rob & De Carolis, Flavio, 2025. "Local institutional ownership and price discovery around extreme weather events," Working Paper Series 3069, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253069
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp3069~93198181b2.en.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    asset pricing; event study; extreme weather events; market segmentation;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • 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

    Statistics

    Access and download statistics

    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:ecb:ecbwps:20253069. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    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.