Climate risk: The price of drought

Huynh, Thanh D.; Nguyễn, Thu Hà; Truong, Cameron

doi:10.1016/j.jcorpfin.2020.101750

Cited by 148 publications

(37 citation statements)

References 76 publications

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“…Second, our findings contribute to the literature on the role of environmental governance plays against unexpected shocks. Prior studies examine the effect of environmental performance and risk on corporate performance such as stock returns ( Liu et al, 2021 ) and the cost of capital ( Huynh et al, 2020 ) during normal times. This study advances the knowledge of the relationship between environmental governance and firm performance by identifying EGS as an important but formerly ignored driver of corporate investment efficiency during crisis times.…”

Section: Introductionmentioning

confidence: 99%

Corporate environmental governance scheme and investment efficiency over the course of COVID-19

Liu

Jiang

Xue

et al. 2022

Finance Research Letters

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Section: Introductionmentioning

confidence: 99%

Corporate environmental governance scheme and investment efficiency over the course of COVID-19

Liu

Jiang

Xue

et al. 2022

Finance Research Letters

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“…We follow Huynh et al . (2020) to consider seven sectors based on the Fama–French 48 industry definition as the water‐dependent industries consisting of agriculture, food products, candy and soda, beer and liquor, mining, coal and oil.…”

Section: Resultsmentioning

confidence: 99%

“…In this vein, Huynh et al . (2020) show that drought episodes can significantly increase a firm’s implied cost of equity capital and risk profile while Do et al . (2021) report that loan spreads are significantly higher when firms operate in drought‐affected areas.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Since drought is one of the principal causes of water crises and global warming, it is more likely to have impacts on individual firms. In this vein, Huynh et al (2020) show that drought episodes can significantly increase a firm's implied cost of equity capital and risk profile while Do et al (2021) report that loan spreads are significantly higher when firms operate in drought-affected areas. On the basis that auditors are concerned with climate risk, Truong et al (2017) document that firms incur significantly higher audit fees when drought intensity is high.…”

Section: Drought Riskmentioning

confidence: 99%

“…Therefore, drought risk at the state level can be considered local systematic risk, which affects both water and non-water dependent industries. We follow Huynh et al (2020) to consider seven sectors based on the Fama-French 48 industry definition as the water-dependent industries consisting of agriculture, food products, candy and soda, beer and liquor, mining, coal and oil.…”

Section: The Spill Over Effect Of Drought On Capital Structure and Sp...mentioning

confidence: 99%

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Drought risk and capital structure dynamics

Nguyen

Bai

Hou

et al. 2021

Accounting & Finance

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Using a fractional dependent estimator (DPF) approach and 130,511 US firm‐year observations over the period 1970–2015, this paper examines the impact of drought risk on firms’ capital structure and the adjustment speed of capital structure (SOA). We demonstrate that drought risk has negative effects on both leverage and the speed of leverage adjustment. We also find evidence of the spillover effect of drought on the adjustment speed of capital structure among firms operating in non‐water dependent industries. The effects are stronger for firms with no credit ratings. Interestingly, firms with strong cash flows can adjust their capital structure more quickly. Collectively, our findings suggest that climate risk in the form of drought not only affects firm risk but also the capital structure of firms, thereby highlighting that externality from climatic conditions are relevant to business operations and corporate polices.

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The impact of climate vulnerability on new firm formation

Anton

2024

Bus Strat Dev

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The aim of the paper is to examine the influence of climate vulnerability (CV) on the formation of new firms. Employing a large sample of 140 countries spanning the time frame 2006–2020, it has been found that climate vulnerability harms new firm formation. The empirical results show that the negative impact of CV on the average new business formation rate has been 3.40. The results prove to be robust for alternative subsamples and methodology. Furthermore, the results of the quantile regression highlight a parameter heterogeneity in the effect of CV on entrepreneurial activity. Overall, the empirical findings highlight the key role of climate vulnerabilities in developing public policies aimed to spur entrepreneurial activity.

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Climate risk: The price of drought

Cited by 148 publications

References 76 publications

Corporate environmental governance scheme and investment efficiency over the course of COVID-19

Corporate environmental governance scheme and investment efficiency over the course of COVID-19

Drought risk and capital structure dynamics

The impact of climate vulnerability on new firm formation

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