The Impact of Flooding on Firm Performance and Economic Growth
PLOS ONE, forthcoming
59 Pages Posted: 27 Jul 2022
Date Written: May 2022
Using comprehensive flood data from China, we find a significant, negative impact of flooding on firm performance, which is mainly driven by unexpected flooding. We use multiple identification strategies to address endogeneity concerns and find that the documented impact of flooding on firm performance is likely causal. The impact is more pronounced for firms with more tangible asset investment, firms located in cities with low government quality, firms facing tight financial constraints, firms controlled by non-government entities and firms with low geographic diversification. Flood-exposed firms react to the threat by altering their investment, financial, cash, payout and executive compensation policies. Finally, flooding also exerts a significant impact on local economic and employment growth.
Keywords: Flooding, Firm Performance, Firm Policies, Economic and Employment Growth
JEL Classification: Q51, G30, O44
Suggested Citation: Suggested Citation