This study investigates the association between firm-level climate risk exposure and corporate cash holdings, drawing on transcript-based climate measures constructed from earnings conference calls. These measures track the relative frequency of climate-related bigrams in quarterly transcripts, providing a forward-looking and firm-specific view of climate exposure that distinguishes between overall, regulatory, and physical dimensions. We further exploit the release of the Stern Review in 2006 as a common shock to climate awareness, using it as a conceptual test of whether greater climate salience amplifies the link between firm-level exposure and precautionary liquidity accumulation. Our findings show that firms with higher climate risk exposure maintain significantly larger cash reserves, consistent with a precautionary savings motive. Financially constrained firms exhibit a stronger response than their unconstrained counterparts, reflecting the interaction between climate uncertainty and financing frictions. The results also demonstrate how text-based alternative data derived from managerial disclosures can uncover firm-level climate exposure that aggregate proxies may fail to capture, with direct implications for research in emerging markets where conventional climate data are often limited.
Qiao et al. (Wed,) studied this question.