The impact of extreme precipitation and flooding risk on corporate investment: Does government disaster preparedness matter?

IF 8.7 2区经济学 Q1 ECONOMICS

Economic Analysis and Policy Pub Date : 2025-10-03 DOI:10.1016/j.eap.2025.09.032

Xi Cheng, Jun Li, Chao Feng

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引用次数: 0

Abstract

This study investigates how corporate investment reacts to climate change risk and how disaster preparedness effort by local government stimulates corporate investment. We quantify city-level extreme precipitation and flooding risk through both daily precipitation and disaster event data. Our results show that firms raise their investment in response to extreme precipitation and flooding risk. Furthermore, recognizing the importance of government commitment to combat climate change, this study reveals that local disaster preparedness fosters corporate investment in productive activities amid escalating climate change challenges, which results from lower financial burdens for risk mitigation and decreased investment prudence for risk avoidance. We identify the decline in corporate resilience investment, precautionary cash holdings, and outward FDI due to local disaster preparedness. Additionally, we highlight that large firms are not only more responsive to climate change risk than smaller counterparts, but exhibit heightened reaction to local disaster preparedness. Our findings not only uncover the influence of extreme precipitation and flooding risk on corporate investment, but unpack how government disaster preparedness serves to enhance corporate sustainability under climate uncertainty.

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极端降水和洪水风险对企业投资的影响：政府备灾重要吗？

本研究探讨企业投资如何因应气候变迁风险，以及地方政府的防灾工作如何刺激企业投资。我们通过日降水和灾害事件数据量化了城市级极端降水和洪水风险。我们的研究结果表明，企业在应对极端降水和洪水风险时增加了投资。此外，认识到政府应对气候变化承诺的重要性，本研究表明，在气候变化挑战不断升级的情况下，地方备灾促进了企业对生产活动的投资，这是由于减轻风险的财政负担较低，以及为避免风险而降低的投资审慎性。我们发现，由于地方备灾，企业抗灾投资、预防性现金持有和对外直接投资下降。此外，我们强调，大公司不仅对气候变化风险的反应比小公司更灵敏，而且对当地的灾害准备也表现出更强的反应。我们的研究结果不仅揭示了极端降水和洪水风险对企业投资的影响，而且揭示了政府备灾如何在气候不确定性下提高企业的可持续性。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Economic Analysis and Policy ECONOMICS-

CiteScore

9.80

自引率

9.20%

发文量

231

审稿时长

93 days

期刊介绍： Economic Analysis and Policy (established 1970) publishes articles from all branches of economics with a particular focus on research, theoretical and applied, which has strong policy relevance. The journal also publishes survey articles and empirical replications on key policy issues. Authors are expected to highlight the main insights in a non-technical introduction and in the conclusion.