Do Costs of Corporate Loans Rise with Sea Level?

57 Pages Posted: 8 Feb 2023

See all articles by Feng Jiang

Feng Jiang

University at Buffalo - School of Management

Wei Li

affiliation not provided to SSRN

Yiming Qian

University of Connecticut - Department of Finance

Multiple version iconThere are 2 versions of this paper

Abstract

We examine whether climate-change risk affects firms’ cost of capital when firms can adapt to the risk. We find firms’ cost of long-term loans increases with sea level rise (SLR) risk, but this effect mainly holds among firms with high adjustment costs to the risk, i.e., firms for whom it is hard to relocate or otherwise diversify SLR risk. Moreover, the spread-risk sensitivity is higher if the bank has more experience with the risk and in times of heightened media attention. This suggests banks have limited attention to this unconventional risk.

Keywords: Bank loan, Climate change risk, Sea level rise, Syndicated loan, Adjustment cost, Media attention

Suggested Citation

Jiang, Feng and Li, Wei and Qian, Yiming, Do Costs of Corporate Loans Rise with Sea Level?. Available at SSRN: https://ssrn.com/abstract=4351883 or http://dx.doi.org/10.2139/ssrn.4351883

Feng Jiang

University at Buffalo - School of Management ( email )

344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)

Wei Li (Contact Author)

affiliation not provided to SSRN

Yiming Qian

University of Connecticut - Department of Finance ( email )

2100 Hillside Road U-1041F, Room 452
Storrs, CT 06269
United States
860-486-2774 (Phone)

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