Weather and Business: Evidence from Large-Scale Linguistic Analyses

52 Pages Posted: 20 Aug 2019 Last revised: 4 Feb 2020

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: February 3, 2020

Abstract

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

Nagar, Venky and Schoenfeld, Jordan, Weather and Business: Evidence from Large-Scale Linguistic Analyses (February 3, 2020). 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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
92
Abstract Views
677
rank
294,006
PlumX Metrics