Climate Change, Firm Performance, and Investor Surprises
74 Pages Posted: 30 Aug 2019
Date Written: May 21, 2019
In this study, we link records of firrm performance, forecasts of analysts, and the returns after earnings announcements to firm-specific measures of heat exposure for 4,400 firms in 57 countries from 1995 to 2017. We find that increasing exposure to extremely high temperatures reduces revenues and operating income. Moreover, the deviation in analyst estimates from actual financial performance and the earnings announcement returns become more negative when firms' heat exposure increases. These findings indicate that investors do not anticipate the economic repercussions of heat as a first-order physical climate risk.
Keywords: Climate Change, Extreme Temperatures, Firm Performance, Analyst Forecast Accuracy, Investor Expectations
JEL Classification: G39, G140, Q54
Suggested Citation: Suggested Citation