Predicting Weather Exposure with Historical Evidence from Form 8-K

Abstract

I show that history is more informative about firms’ future exposure to weather events than forward-looking claims made by managers. This is because Form 8-K, an event-based filing that allows firms to immediately report on unscheduled material events to shareholders, holds valuable information on current and future exposure. A new Form 8-K-based measure of historical weather exposure matches reasonable priors about exposure characteristics, identifies exposed firms during severe weather events, and, unlike other measures of exposure, has a clear materiality threshold. Overall, forward-looking risk-based disclosure, such as that recommended by the International Sustainability Standards Board, appears uninformative, and much more can instead be learned from history.

Keywords: Form 8-K, Form 10-K, Climate Disclosure, Physical Climate Risk, Weather

JEL Classification: G12, G14, Q54