How do firms cope with losses from extreme weather events?

Arbeitspapier

We document the investment and financing decisions of firms that experience monetary losses due to extreme weather events. Our sample covers firms operating in 41 economies, mainly emerging and developing markets. Consistent with the need to either replenish damaged capital or to adapt to climate change, firms hit by extreme weather are more likely to invest in long-term assets. In addition, they are more likely to integrate climate-friendly measures in their production processes. Although these firms have higher needs for bank credit, they are not more likely to be credit constrained than the average firm. Nonetheless, they face higher loan rejection rates and they are more leveraged than otherwise comparable firms. This suggests that climate change has the potential to erode the quality of firm balance sheets over time.

Object Details

• ISBN: 978-92-861-5373-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: EIB Working Papers ; No. 2022/10

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Empirical Analysis ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Firm Objectives, Organization, and Behavior: General ; Climate; Natural Disasters and Their Management; Global Warming
• Subject: Physical climate risk ; Extreme weather ; Access to credit ; Corporate investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Benincasa, Emanuela ; Betz, Frank ; Gattini, Luca
• Event: Veröffentlichung
• (who): European Investment Bank (EIB)
• (where): Luxembourg
• (when): 2022

Further information

• DOI: doi:10.2867/324845
• Handle: http://hdl.handle.net/10419/261495
• Last update: 10.03.2025, 11:43 AM CET