Climate Change Exposure and Diversification

Published: 18 April 2024| Version 1 | DOI: 10.17632/ppcwcm3cv9.1
Yuqiang Cao, Jiali Wu, Meiting Lu, Yaowen Shan, Yanglan Zu


We use the CNRDS database to extract information from firms’ conference calls to construct the variable of interest, firm-level climate change exposure (CCExposure). We rely on local statistical yearbooks for regional investments in environmental pollution control and GDP figures. Firm- and industry-specific financial variables are obtained from the CSMAR database. The study hypothesized that climate change exposure (CCE) would increase the degree of corporate diversification (DIV). We verified the mechanisms of capacity utilization (CU/OC), return risk (ROA volatility/Daily (and Monthly) yield volatility) and cash flow risk (Cash Risk) of the research by means of subgroup testing. We hold a series of robustness tests such as instrumental variables method(with three instrument variables, eg. Chinese Low-carbon Policy/Regional Temperature & Ventilation Coefficient/Lewbel way), PSM, entropy balance, Oster test, Permutation test, etc.. We claritfy the difference effects of the sentiments(positive/negative) and properties(physical/regulatary) of CCE on DIV. Heterogeneity tests on regional and industry characteristics(Regional Green Investment/Industrial Proitability), corporate green governance characteristics(Executive Green Cognition/Environment Score) and performance characteristics(Performance/Retain), etc.. Finally a two-stage model is used to test the impact of diversification increment driven by climate change exposure on corporate financing constraints (SA) and value (MB).



University of Technology Sydney, Macquarie University, Guangdong University of Foreign Studies


Climate Change, Diversification Strategy