Organisation capital: A key asset for mitigating firm-level climate change exposure

Abstract

Despite growing evidence of the importance of organisation capital, its impact on corporate resilience remains underexplored. This study investigates whether organisation capital provides firms with greater resilience and reduces their exposure to climate change. By analysing a sample of 3,622 US firms from 2001 to 2021, we found that firms with high organisation capital experienced less climate change exposure. This result remained robust across various tests and methods to address endogeneity concerns. Furthermore, organisation capital was found to act as a mediator or suppressor in the relationship between firm-specific factors – such as financial constraints, analyst forecast quality, agency costs, financial leverage, corporate governance, firm performance, efficiency, operating performance, product market competition, and environmental commitment and initiative – and climate change exposure. Overall, our results underscore the resilience benefits provided by organisation capital and highlight its critical role in mitigating climate-related risks.