Firms' Strategic Management in the Face of Climate Risk and Catastrophic Natural Disasters

<p dir="ltr">This thesis consists of three empirical studies in the area of climate finance, examining firms’ strategic management to cope with emerging climate risks.</p><p dir="ltr">The first study employs catastrophic natural disasters as adverse shocks to firms’ operations to investigate firms’ post-disaster corruption behaviours. On average, catastrophic natural disasters lead to a 47.4 per cent increase in corruption fees paid by affected firms. Such an increase in corruption payments enables affected firms to offset the reduction in government assistance following natural disasters. However, the relationship between natural catastrophes and firm-level corruption is weaker for firms with political connections, a history of high tax avoidance, and located in provinces with strong local governance.</p><p dir="ltr">The second study explores whether corruption lubricates firms’ access to credit in the aftermath of catastrophic natural disasters. Using a robust stacked difference-in-differences approach centred around natural disaster events, I find that firms engaging in corrupt activities during the post-disaster period tend to face lower credit constraints than their non-corrupt counterparts. Further analysis reveals that politically connected firms have a distinct advantage in securing vital credit resources during catastrophic natural disasters through their engagement in corruption practices.</p><p dir="ltr">The third study uncovers whether aggressive CEOs reduce corporate carbon emissions in response to the heightened climate regulatory risks associated with the finalisation of State Climate Adaptation Plans (SCAP) across different U.S. states. The findings show that firms led by more aggressive CEOs decrease carbon emissions after the SCAP finalisation, primarily through adopting carbon emission reduction policies. Moreover, the link between CEOs' aggressiveness and corporate carbon emissions is stronger in firms with more powerful CEOs, located in collectivist states, and facing lower SCAP uncertainty. Interestingly, while firms with more aggressive CEOs reduce carbon emissions, their efforts are not reflected in ESG ratings because these CEOs are less likely to make public commitments to emit less. This paradoxical finding suggests that firms led by more aggressive CEOs are less inclined to engage in greenwashing behaviour.</p>