Climate Risks and Debt Specialization

49 Pages Posted: 8 Sep 2022 Last revised: 31 Oct 2022

See all articles by Bill Francis

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Chunxia Jiang

University of Aberdeen

Zenu Sharma

St John's University; Rensselaer Polytechnic Institute

Yun Zhu

St. John's University - Department of Economics and Finance

Date Written: August 19, 2022

Abstract

This paper examines the debt structure of a sample of U.S. firms exposed to climate risks. Climate risks, categorized as physical, regulatory, and transition risks are associated with greater debt specialization for the affected firms. We find physical and regulatory risks, propagating through the channels of expected bankruptcy cost and access to finance, increase debt specialization, while transition risk shows limited impact. We also find that asset redeployability and Corporate Social Responsibility moderate the impact of climate risk on firm’s debt structure with decreased debt specialization.

Keywords: Corporate Debt; Climate Change; Corporate Social Responsibility

JEL Classification: D22 G32 Q54

Suggested Citation

Francis, Bill and Hasan, Iftekhar and Jiang, Chunxia and Sharma, Zenu and Zhu, Yun, Climate Risks and Debt Specialization (August 19, 2022). Available at SSRN: https://ssrn.com/abstract=4198318 or http://dx.doi.org/10.2139/ssrn.4198318

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology ( email )

110 8th St
Troy, NY 12180
United States

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Chunxia Jiang

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

Zenu Sharma

St John's University ( email )

8000 Utopia Pkwy
Queens, NY 11439
United States
7189905496 (Phone)

Rensselaer Polytechnic Institute ( email )

Troy, NY 12180
United States

Yun Zhu (Contact Author)

St. John's University - Department of Economics and Finance ( email )

Jamaica, NY 11439
United States

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