Does Climate Change Exposure Matter to Stakeholders? Evidence from the Costs of High Leverage

58 Pages Posted: 25 Aug 2023 Last revised: 15 Nov 2023

See all articles by Sadok El Ghoul

Sadok El Ghoul

University of Alberta - Campus Saint-Jean

Omrane Guedhami

University of South Carolina - Moore School of Business

Huan Kuang

Bryant University

Ying Zheng

Bryant University

Date Written: June 30, 2023

Abstract

This work adds to climate finance research by studying stakeholder reactions to climate change exposure in the context of capital structure and product market interactions. We use a sample of 2,547 U.S. firms from 2004 to 2020, and find that climate change exposure intensifies stakeholder-driven costs of high leverage. The impact is stronger for firms headquartered in Democratic-leaning states, during the post–Paris Agreement period, and for industries with more physical exposure, and for firms with more sensitive stakeholder responses. Overall, our results suggest that highly leveraged firms are vulnerable to climate change shocks, and subject to stricter scrutiny from their stakeholders. Our study has several implications for climate finance research.

Keywords: climate finance; climate risk; capital structure; product market performance; stakeholders

JEL Classification: Q54; G32; G33

Suggested Citation

El Ghoul, Sadok and Guedhami, Omrane and Kuang, Huan and Zheng, Ying, Does Climate Change Exposure Matter to Stakeholders? Evidence from the Costs of High Leverage (June 30, 2023). Review of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4541036 or http://dx.doi.org/10.2139/ssrn.4541036

Sadok El Ghoul

University of Alberta - Campus Saint-Jean ( email )

Edmonton, Alberta T6G 2R3
Canada
780-465-8725 (Phone)
780-465-8760 (Fax)

Omrane Guedhami

University of South Carolina - Moore School of Business ( email )

Columbia, SC
United States

Huan Kuang

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

HOME PAGE: http://www.bryant.edu/academics/faculty/kuang-huan

Ying Zheng (Contact Author)

Bryant University

1150 Douglas Pike
Smithfield, RI 02917
United States
8033189733 (Phone)

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