Articlegold2023

Firm climate change risk and financial flexibility: Drivers of ESG performance and firm value

Mirza Muhammad Naseer · Muhammad Asif Khan · Tanveer Bagh · Yongsheng Guo · Xiaoxian Zhu

105 citations0/0 files storedBorsa Istanbul Review

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Corporate Social Responsibility Reporting Corporate Finance and Governance Sustainable Finance and Green Bonds

Abstract

This study investigates how a firm's climate change risk (FCCR) and financial flexibility (FIFL) affect its value and environmental, social, and governance (ESG) performance. We use data from publicly listed US firms for 2012–2021. We employed four estimation methods: bootstrap quantile regression, feasible generalised least squares, a generalised method of moments, and fixed effects with Driscoll-Kraay standard errors. Our main findings indicate that climate change risk has a negative effect on firm value and a positive effect on ESG performance and that financial flexibility moderates these effects by reducing risk and enhancing value. These results are robust against alternative measures and estimation techniques. Our study provides novel insights into the influence of climate risk and financial flexibility on firm value and ESG performance. We also discuss the implications of our results for academics, practitioners, and policymakers.

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References

1991Firm Resources and Sustained Competitive Advantage 1991Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations 1984A resource‐based view of the firm 1998Initial conditions and moment restrictions in dynamic panel data models 1995Another look at the instrumental variable estimation of error-components models 1995Toward a New Conception of the Environment-Competitiveness Relationship 2007The Social Responsibility of Business Is to Increase Its Profits 2009How to do Xtabond2: An Introduction to Difference and System GMM in Stata

Cited by

2024Corporate ESG investments and Firm's value under the real-option framework: Evidence from two world-leading economies 2024From risk to resilience: Climate change risk, ESG investments engagement and Firm's value 2025ESG‐Firm Performance Nexus: Evidence From an Emerging Economy 2024The role of corporate governance in the nexus between litigation risk and corporate innovation 2024Executive team's digital background, financial flexibility and corporate innovation: Evidence from China

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