Biodiversity risk exposure and corporate risk-taking

Abstract

10-K reports transcend mere biodiversity risk disclosure, reflecting companies' proactive approaches to risk management. According to risk and reputation theories, this positive attitude towards risk management and the potential good reputation that it may bring about have won companies a greater number of financing opportunities, thereby increasing the possibility of risk-taking. By examining data from U.S. listed companies, we obtain findings that indicate that firm-level biodiversity risk significantly positively affects corporate risk-taking. Mechanism analysis reveals that biodiversity risk exposure alleviates financing constraints, fostering risk-taking. In addition, the empirical results of the moderating effect analysis reveal that the effects of firm-level biodiversity risk on risk-taking are more pronounced for firms with nonfemale executives, a shorter executive tenure, and a lower level of ownership concentration than for other firms. Our findings offer new insights for policy makers, managers, and investors to focus on the relationship between a firm's biodiversity risk exposure and its risk-taking behaviour.