Measuring Corporate Exposure to Weather Using Linguistic Analysis
40 Pages Posted: 20 Aug 2019 Last revised: 25 Sep 2019
Date Written: September 24, 2019
We create a new firm-level linguistic measure of the impact of weather on individual publicly traded U.S.\ firms from annual reports. This measure increases in a difference-in-differences manner for firms impacted by hurricanes and correlates well with weather-dependent industries and firms headquartered in weather-exposed states. Most important, firms scoring high on our measure experience significantly lower returns during exogenous weather shocks, i.e., extreme local storms. Tests using operational measures such as profitability further support the returns results. Overall, our evidence stands in contrast to recent null results on the relation between weather and firm-level outcomes in rich countries.
Keywords: Corporate Investment, Firm Value, Profitability, Weather
JEL Classification: G12, G14, O13, Q54
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