Firm-Level Climate Change Exposure and Probability of Default
Using a broad sample of U.S firms from 2002 to 2021, we confirm the positive impacts of firm-level exposure to climate change risks on default risk. This effect is more pronounced (attenuated) for firms with greater financial constraints and leverage (information efficiency), and especially after the major climate change treaties and shocks to climate risk exposure. We also find that carbon-intensive firms and sectors are affected more insensitively compared to carbon-non-intensive ones. Our findings remain consistent under a battery of robustness tests and sensitivity analyses