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Firm-level Climate Vulnerability and Corporate Risk-taking: International Evidence

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  • Md Lutfur Rahman

    (University of Newcastle)

  • Sudipta Bose

    (University of Newcastle)

Abstract

This study examines the association between firm-level climate change risk exposure and corporate risk-taking using a sample of 50,782 firm-year observations from 2003 to 2021 across 58 countries worldwide. Using a time-varying measure of firm-level climate change risk exposure derived from corporate conference call transcripts, we find a negative relationship between firm-level climate change risk exposure and corporate risk-taking. We also find that the negative association is more pronounced for firms with higher environmental innovation and firms domiciled in countries with stakeholder-oriented business cultures and stronger governance. Our key finding is robust under several alternative corporate risk-taking and climate change risk exposure proxies. The findings of this study could be used by policymakers to enact regulations limiting risky investments in climate-vulnerable sectors or to provide economic safety nets for businesses impacted by climate change.

Suggested Citation

  • Md Lutfur Rahman & Sudipta Bose, 2025. "Firm-level Climate Vulnerability and Corporate Risk-taking: International Evidence," Working Papers DP-2024-36, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:wpaper:dp-2024-36
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    Keywords

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    JEL classification:

    • 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

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