Economics and Finance Faculty Publications and Presentations
Document Type
Article
Publication Date
8-2021
Abstract
We find that firms in location with higher exposure to climate risk pay significantly higher spreads on their bank loans. This result is robust to different measures of climate risk. Exploiting the economic link between a firm and its customers, we find that the exposure of a firm’s customers to climate risk adversely affects that firm’s cost of borrowing. In the cross-section, we find that the effect is mainly driven by long-term loans of poorly rated firms that are highly exposed to climate risk. Overall, our evidence suggests a slow increase in lenders’ attention to climate risk and that lenders have yet to fully understand and price all dimensions of this risk.
Recommended Citation
Javadi, S. and Masum, A. A. (2021) ‘The impact of climate change on the cost of bank loans’, Journal of Corporate Finance, 69, p. 102019. doi: 10.1016/j.jcorpfin.2021.102019.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Publication Title
Journal of Corporate Finance
DOI
10.1016/j.jcorpfin.2021.102019
Comments
Original published version available at doi.org/10.1016/j.jcorpfin.2021.102019