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
TypeCommunication / Conférence
Conference title9th Financial Engineering and Banking Society international Conference
Conference countryCzech Republic
MetadataShow full item record
Abstract (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 / KeywordsCapital Structure; Leverage; Credit Rating; Natural Disasters
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