Climate risks and corporate tax shields

This study investigates the influence of climate risks on the tax shields of US-based firms. The findings show a significant negative correlation between climate risks and debt-related tax shields (DTS), indicating reduced reliance on debt financing due to potential financial risks and regulatory uncertainties. Conversely, non-debt tax shields (NDTS) demonstrate a positive relationship with climate risks, highlighting firms' proactive efforts to seek tax benefits from alternative sources. Additionally, the study uncovers distinct dynamics for high and low-leveraged firms in utilizing tax advantages. The research contributes valuable insights into the intricate interplay of climate risks, tax benefits, and corporate financing decisions.