Climate risk and capital structure
Ginglinger, Edith; Moreau, Quentin (2019), Climate risk and capital structure, 9th Financial Engineering and Banking Society international Conference, 2019-05, Prague, Czech Republic
Type
Communication / ConférenceDate
2019Conference title
9th Financial Engineering and Banking Society international ConferenceConference date
2019-05Conference city
PragueConference country
Czech RepublicMetadata
Show full item recordAbstract (EN)
We use new data measuring forward-looking physical climate risk at the firm level to examine the impact of climate risk on capital structure. We find that greater climate risk leads to lower leverage in the post-2015 period, i.e., after the Paris Agreement. Our results hold after controlling for firm characteristics known to determine leverage, including credit ratings and several fixed effects. Our evidence shows that the reduction in debt related to climate risk is shared between a demand effect (the firm’s optimal leverage decreases) and a supply effect (lenders, especially bankers, reduce their lending to companies with the greatest risk).Subjects / Keywords
Capital Structure; Leverage; Credit Rating; Natural DisastersRelated items
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