Financial Market Perception and Climate Political Leadership
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Abstract:
Exploiting a quasi-natural experimental setup of the 2016 United States presidential results, which unexpectedly shifted the government's position from being supportive of climate science to being openly sceptical, we show that political leadership's climate science belief significantly diminishes financial markets' perception of firm-level climate regulatory exposure. Further investigation reveals that the climate regulatory channel is the fundamental mechanism through which political leaders sway financial markets' perceptions about the strength of firm-level regulatory exposure. Regarding the implications of the link, we find that the capital market rewards the weakened climate regulatory exposure through higher institutional ownership and valuations.
Bio:
https://www.strath.ac.uk/staff/thapachandradr/#expertise