Measuring Corporate Exposure to Weather Using Linguistic Analysis

40 Pages Posted: 20 Aug 2019 Last revised: 25 Sep 2019

See all articles by Venky Nagar

Venky Nagar

University of Michigan, Stephen M. Ross School of Business

Jordan Schoenfeld

Dartmouth College - Tuck School of Business

Date Written: September 24, 2019

Abstract

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

Suggested Citation

Nagar, Venky and Schoenfeld, Jordan, Measuring Corporate Exposure to Weather Using Linguistic Analysis (September 24, 2019). Tuck School of Business Working Paper No. 3438428. Available at SSRN: https://ssrn.com/abstract=3438428 or http://dx.doi.org/10.2139/ssrn.3438428

Venky Nagar

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-3292 (Phone)
734-764-3146 (Fax)

Jordan Schoenfeld (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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