When rain matters! Investments and value relevance

Rao, Sandeep; Koirala, Santosh; Thapa, Chandra; Neupane, Suman

doi:10.1016/j.jcorpfin.2020.101827

Cited by 26 publications

(17 citation statements)

References 101 publications

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“…MNCs that have developed strategies to comply with location-speci c regulatory rules in their home cities face signi cant challenges in host cities with different environmental and from climate change (Fleming, Kirby, & Ostdiek, 2006;Kolk & Pinkse, 2008). In line with the literature, we argue that FDIs in environmentally sensitive industries are more responsive to city-level climate risk differences because they heavily rely on the natural environment and resources (Fleming et al 2006;Huang et al 2018;Rao et al 2021). We nd evidence that supports this prediction, provided that the climate risk in a home city is lower than that in a host city.…”

Section: Introductionsupporting

confidence: 70%

“…Nevertheless, speci c industries might suffer more than others that can potentially bene t from climate change due to new opportunities (Fleming et al, 2006;Kolk & Pinkse, 2008). The vulnerability of certain industries could stem from their heavy dependency on moderate weather (Fleming et al 2006) or rainfall conditions (Rao et al 2021) or (access to) natural resources (Huang et al 2018), all of which are particularly vulnerable to ecological changes. For example, the landscape of agriculture and its trade activities could change dramatically due to rising global temperatures and risks of ooding, deserti cation, and rising sea levels.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

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Adapting to climate risks through cross-border investments: industrial vulnerability and smart city resilience

Liu

Lin

et al. 2022

Climatic Change

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Climate change entails potential risks for investors, and its effects on investment has spread beyond physical borders. This study investigates how multinational corporations (MNCs) incorporate climate risks into their decisions regarding foreign direct investments (FDIs). We nd that large differences in the climate risks of home and host cities discourages FDI by increasing cross-border adaptation costs. Such impacts are particularly pronounced among environmentally sensitive industries that are more exposed to climate risks.Further analysis reveals that city-based smartness factors mitigate the negative impacts of climate risk differences on FDI by reducing adaptation costs and engendering new business opportunities. This study provides new evidence on the profound effects of climate risks on FDI and how smart cities can increase their resilience to climate risks in the context of international business. regulatory practices. Thus, MNCs need to consider the adaptation costs, driven by the heterogeneous climate risks that inform different policies and regulations when investing abroad.MNCs are also exposed to new business opportunities that arise from global climate actions. Policies dedicated to mitigating climate change stimulate technological innovation, from which rms usually earn a monopolistic markup (Nesta et al. 2014). As long as climate risks are priced according to the policy instruments in a market, developing rm-speci c green advantages form the primary sources of rms' pro tability, growth, and business sustainability (Kolk and Pinkse 2008). Private sectors also join the campaign to save the planet through sustainable, responsible, and impact (SRI) investing in climate responsible rms that enable them to improve the access capital at a lower cost (Chava, 2014;Pástor, Stambaugh, & Taylor, 2021). Heterogeneous climate practices and preferences, which depend fundamentally on climate risk, increase the di culty for MNCs to identify climate-related opportunities abroad.How do MNCs incorporate city-level climate change risks into their FDI decisions to manage risks and exploit opportunities? To answer this question, we follow Buggle and Durante (2021) to measure climate risk in a city by the standard deviation of its monthly temperature over the past ten years. Such a measure captures the aggregate impact of interwind factors, such as public and private climate actions, urban development, technology advance and nature environment, on global warming. It saves us from addressing the omitted variable concerns and confounding factors when measuring climate risk indirectly with potential determinants of global warming. Moreover, as policy makers extrapolate policy effectiveness from observed temperature variations, adjust their perceptions of climate risk, and revise their actions accordingly, such a measure of climate risk inform MNCs of future regulatory changes. Interested in how MNCs respond to climate risk from the adaptation cost perspective, we focus on the difference between the climate risk in home and...

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Section: Introductionsupporting

confidence: 70%

Section: Hypothesis Developmentmentioning

confidence: 99%

Adapting to climate risks through cross-border investments: industrial vulnerability and smart city resilience

Liu

Lin

et al. 2022

Climatic Change

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“…Extreme climate events. Considering various types of extreme climate events, we focus on the two most studied types of extreme climate events in the literature (Gray et al, 2023;Li et al, 2021;Martin et al, 2011;Rao et al, 2022;Zhang et al, 2018), i.e., extreme temperature events and extreme precipitation events. Furthermore, extreme temperature events are divided into extreme heat waves (denoted by Extreme Heat) and extreme cold waves (denoted by Extreme Cold).…”

Section: Variable Measurementsmentioning

confidence: 99%

The Effects of Extreme Climate Events on Green Technology Innovation in Manufacturing Enterprises

Wang,

Li,

et al. 2024

Journal of Business Economics and Management

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The increasing intensity and frequency of extreme climate events have made improving the adaptability to extreme climate events a strategic imperative for manufacturing companies. This paper investigates whether manufacturing enterprises increase green technology innovation affected by different extreme climate events. Based on panel data of Chinese listed manufacturing enterprises, we show that extreme precipitation events can positively promote green technology innovation, yet extreme temperature events do not. Heterogeneity analyses suggest that the effect of extreme precipitation events on green technology innovation is more significant for non-state-owned enterprises, poor performance enterprises, and high R&D intensity enterprises than other enterprises. Furthermore, the facilitating effect of extreme precipitation events on green technology innovation is merely temporary.

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“…Using the Global Climate Risk Index, Huang et al (2018) document that extreme climate risks alter firms' cash holding and financing choices. Based on Indian monsoon data, Rao et al (2022) show that firm investments are affected by rainfall conditions. Our paper differs from these studies in three aspects.…”

Section: Introductionmentioning

confidence: 99%

Flood risk and corporate future orientation: Evidence from sea level rise risk

Tsang

Wang

2023

Business Fin & Account

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We find that firms located in US counties with higher sea level rise (SLR) risk engage less in future‐oriented activities, that is, lower corporate social responsibility performance, lower R&D investment and fewer patents granted than firms in counties with lower SLR risk. The effect is strengthened when media attention on climate change is high, when the firm has a high level of prior long‐term investment and when the firm is managed by a young CEO and a CEO who has a greater tendency to avoid uncertainty, whereas it is weakened when the firm's CEO is near retirement and when the firm is geographically diversified. Overall, we document a negative relationship between flood risk exposure and corporate future orientation, suggesting that firms change their future‐oriented attitude in response to concern over climate risks.

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When rain matters! Investments and value relevance

Cited by 26 publications

References 101 publications

Adapting to climate risks through cross-border investments: industrial vulnerability and smart city resilience

Adapting to climate risks through cross-border investments: industrial vulnerability and smart city resilience

The Effects of Extreme Climate Events on Green Technology Innovation in Manufacturing Enterprises

Flood risk and corporate future orientation: Evidence from sea level rise risk

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