| dc.description.abstract | This thesis contains three independent cross-country studies focusing on examining the effects of climate risks and environmental policy stringency on corporate decision-making, respectively. The first two studies investigate the effects of climate risks on the bank liquidity creation and the cash flow sensitivity of cash holdings. The third study examines the effects of environmental policy stringency on corporate leverage.
In the first essay, I use a comprehensive cross-country bank-level database from 1995 to 2012 to examine the relationship between climate risk and bank liquidity creation. The main empirical findings illustrate that climate risks have a general negative relationship with bank liquidity creation. To be more specific, climate sensitivity and exposure negatively affect liquidity creation, while climate adaptation is positively related to liquidity creation. These effects are more prominent for banks with larger sizes and lower capital, or banks in developing countries. Overall, the results from the first essay lend significant support to the view that climate change can have detrimental effects on bank liquidity creation, thus prompting policymakers to formulate policies to assist banks with coping with climate change.
In the second essay, I examine how climate risks can influence the cash flow sensitivity of cash holdings across 87 countries from 1994 to 2014. The main empirical results reveal that climate risks induce a positive cash flow sensitivity of cash holdings, that is, firms accumulate cash holdings by saving from additional positive cash flows. Such phenomenon is more apparent in the presence of significant financial constraints. The empirical findings of this essay illustrate the current climate risk impacts can induce firms to increase corporate cash holdings from additional cash flows as a precautionary means against external climate shocks.
In the last essay, I investigate the influence of environmental policy stringency on corporate
leverage across 39 countries from 1994 to 2020. The main results illustrate that environmental
policy stringency leads to a decline in leverage; additionally, firms increase the use of long-term
corporate leverage and decrease short-term leverage, respectively. Such effects are pronounced for
firms with financial constraints, in countries with significant climate-risk exposure, or in Asia. The
findings from this essay also support that environmental policies can influence corporate financing
decisions as firms respond to the impacts of these external environmental policies. | en_US |