Abstract
Increasingly adverse climatic conditions have created greater systematic risk for companies throughout the global economy. Few studies have directly examined the consequences of climate-related risk on financing choices by publicly listed firms across the globe. We attempt to do so using the Global Climate Risk Index compiled and published by Germanwatch (Kreft & Eckstein, 2014), which captures at the country level the extent of losses from extreme weather events. As expected, we find the likelihood of loss from major storms, flooding, heat waves, etc. to be associated with lower and more volatile earnings and cash flows. Consistent with policies that attempt to moderate such effects, we show that firms located in countries characterized by more severe weather are likelier to hold more cash so as to build financial slack and thereby organizational resilience to climatic threats. Those firms also tend to have less short-term debt but more long-term debt, and to be less likely to distribute cash dividends. In addition, we find that certain industries are less vulnerable to extreme weather and so face less climate-related risk. Our results are robust to using an instrumental variable approach, a propensity-score-matched sample, and path analysis, and remain unchanged when we consider an alternative measure of climate risk. Finally, our conclusions are invariant to the timing of financial crises that can affect different countries at different times.
Résumé
Des conditions climatiques de plus en plus défavorables ont créé un risque systématique plus important pour les entreprises partout dans l’économie globale. Peu d’études ont directement analysé les conséquences du risque climatique sur les choix de financement des firmes cotées en bourse dans le monde. Nous tentons de le faire en utilisant l’index du risque du climat global développé et publié par Germanwatch (Kreft et Eckstein, 2014) qui mesure à l’échelle d’un pays le niveau des pertes liées aux événements climatiques extrêmes. Comme cela était attendu, nous constatons que la probabilité de pertes liées à de fortes tempêtes, des inondations, des vagues de chaleur… est associée à des profits et des flux financiers moins élevés et plus volatils. En cohérence avec les politiques qui tentent de modérer ces effets, nous montrons que les firmes localisées dans des pays caractérisés par un climat plus sévère sont plus susceptibles de détenir plus de liquidités pour bâtir un système financier et ainsi une résilience organisationnelle aux menaces climatiques. Ces firmes tendent aussi à avoir moins de dettes à court terme, mais plus de dettes à long terme; elles sont moins susceptibles de distribuer des dividendes en espèces. Par ailleurs, nous constatons que certaines industries sont moins vulnérables aux conditions climatiques extrêmes et sont ainsi moins confrontées au risque lié au climat. Nos résultats sont robustes et reposent sur l’approche fondée sur des variables instrumentales, un échantillon compatible aux scores de propension et une analyse de trajectoires ; ils restent inchangés quand nous considérons une mesure alternative du risque climatique. Enfin, nos conclusions sont invariables par rapport au calendrier des crises financières qui peuvent affecter des pays différents à des moments différents.
Resumen
Las crecientes condiciones climáticas adversas han creado riesgos sistemáticos aún mayores para las empresas en toda la economía global. Pocos estudios han examinado directamente las consecuencias de los riesgos relacionados con el clima en las opciones financieras de empresas que cotizan en bolsa en todo el planeta. Intentamos hacerlo usando el Índice de Riesgos Climáticos Globales recopilado y publicado por Germanwatch (Kreft & Eckstein, 2014), el cual captura a nivel país el alcance de las pérdidas por eventos extremos de clima. Como se esperaba, encontramos que la probabilidad de pérdidas por tormentas mayores, inundaciones, olas de calor, etc., se asocia con menores y más volátiles ganancias y liquidez. Consistente con las políticas que intentan moderar estos efectos, mostramos que las empresas ubicadas en países caracterizados con condiciones de tiempo más severo son más propensas a conservar más dinero con el fin de construir músculo financiero y de este modo resiliencia organizacional a amenazas climáticas. Esas empresas también tienden a tener menos deuda de corto plazo, pero más deuda a largo plazo, y a tener menor probabilidades de distribuir dividendos en efectivo. Adicionalmente, encontramos que ciertas industrias son menos vulnerables al estado de tiempo más severo y por esto enfrentar menos riesgos asociados al clima. Nuestros resultados son robustos para usar un enfoque de variable instrumental, una muestra de puntaje de proclividad (propensity-score-matched), y un análisis de trayectoria, y permaneció sin cambios cuando consideramos una medida alternativa de riesgo climático. Finalmente, nuestras conclusiones no cambian con los momentos de crisis financieras que pueden afectar países diferentes en diferentes tiempos.
Resumo
Condições climáticas cada vez mais adversas criaram maior risco sistemático para as empresas em toda a economia global. Poucos estudos examinaram diretamente as consequências do risco relacionado ao clima em escolhas financeiras por empresas listadas em todo o mundo. Nós tentamos fazê-lo usando o Índice de Risco Climático Global compilado e publicado pela Germanwatch (Kreft & Eckstein, 2014), que capta a nível de país a extensão das perdas em eventos climáticos extremos. Como esperado, encontramos a probabilidade de perda em grandes tempestades, inundações, ondas de calor, etc., associadas a resultados e fluxos de caixa mais baixos e voláteis. Em consonância com políticas que tentam minimizar esses efeitos, mostramos que as empresas localizadas em países caracterizados por um clima mais severo têm mais probabilidade de manter mais dinheiro em caixa, de modo a estabelecer uma folga financeira e, assim, uma resiliência organizacional às ameaças climáticas. Essas empresas também tendem a ter menos dívidas de curto prazo, mas mais dívidas de longo prazo, e ser menos propensas a distribuir dividendos em dinheiro. Além disso, achamos que certas indústrias são menos vulneráveis a climas extremos e, portanto, enfrentam menos riscos relacionados ao clima. Nossos resultados são robustos ao usar uma abordagem com variáveis instrumentais, uma amostra compatibilizada com propensity score e análise de trajetória, e permanecem inalterados quando consideramos uma medida alternativa de risco climático. Finalmente, nossas conclusões não variam com o momento de crises financeiras que podem afetar diferentes países em momentos distintos.
概要
越来越不利的气候条件对全球经济中的公司带来了更大的系统风险。很少有研究去直接调查气候相关风险对全球各地的上市公司融资选择的影响。我们试图通过用德国观察(Kreft&Eckstein,2014)编制出版的全球气候风险指数来进行这项研究,在国家层面上去认识极端的天气事件所造成损失的程度。如预期的那样,我们发现了大风暴、洪水、热浪等所造成的损失与较低的和更易变的收益和现金流相关的可能。 与试图缓解这种影响的政策一致,我们显示,位于更恶劣天气国家的公司更有可能持有更多的现金,从而建立财务空隙及对气候威胁的组织韧性。这些公司也往往有较少的短期债务,但有较多的长期债务,而且不太可能有现金分红。另外,我们发现某些行业在极端天气下不那么脆弱,所以面临较少的气候相关风险。我们的结果对使用工具变量法、倾向评分匹配样本、及路径分析是稳健的,而且当我们考虑气候风险的替代量表时,它们保持不变。最后,我们的结论对在不同时期可能影响不同国家发生金融危机的时间是不变的。
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Acknowledgements
We thank the valuable comments from the Editor-in-Chief Alain Verbeke, Editor Gary Biddle, the three anonymous reviewers, and the participants of workshop at the University of Kentucky and the Mid-year Conference of International Accounting Section of American Accounting Association. Chong Wang acknowledges the financial support from Hong Kong Polytechnic University Start-up Fund and the National Natural Science Foundation of China (Fund # 71332008).
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Accepted by Gary Biddle, Area Editor, 14 October 2017. This article has been with the authors for three revisions.
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Huang, H.H., Kerstein, J. & Wang, C. The impact of climate risk on firm performance and financing choices: An international comparison. J Int Bus Stud 49, 633–656 (2018). https://doi.org/10.1057/s41267-017-0125-5
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DOI: https://doi.org/10.1057/s41267-017-0125-5