Weather and Business: Evidence from Large-Scale Linguistic Analyses
52 Pages Posted: 20 Aug 2019 Last revised: 4 Feb 2020
Date Written: February 3, 2020
We create a new firm-level linguistic measure of weather exposure for publicly traded U.S. firms from annual reports. We find that firms scoring high on our measure experience significantly lower returns and an increased likelihood of analyst forecast downgrades during exogenous weather shocks of extreme local storms. These firms also exhibit systematic risk over and beyond standard risk factors. Panel tests using operational measures are consistent with the returns results. We also validate our measure using a difference-in-differences setting and other tests. Overall, our evidence stands in contrast to recent null results on the relation between weather and firm-level outcomes.
Keywords: Corporate Investment, Firm Value, Profitability, Weather
JEL Classification: G12, G14, O13, Q54
Suggested Citation: Suggested Citation