Ivan Blanco, Jose M. Martin-Flores, Alvaro Remesal
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Abstract
We analyze how the materialization of physical climate risk in the institutional investors’ portfolios spurs a propagation effect on the information content of stock prices. Institutional investors with a relatively high portfolio exposure to natural disasters divest from disaster-hit stocks, decrease the trading intensity in non-hit stocks, and their trading decisions predict low medium-term returns. At the firm-level, institutional investors propagate the effects of disasters to non-hit stocks through reduced incorporation of firm-specific information, especially when the stocks represent a low portfolio weight. Combined, these results suggest that natural disasters trigger a rational reallocation of information-processing resources by institutional investors.
期刊介绍：
The Journal of Corporate Finance aims to publish high quality, original manuscripts that analyze issues related to corporate finance. Contributions can be of a theoretical, empirical, or clinical nature. Topical areas of interest include, but are not limited to: financial structure, payout policies, corporate restructuring, financial contracts, corporate governance arrangements, the economics of organizations, the influence of legal structures, and international financial management. Papers that apply asset pricing and microstructure analysis to corporate finance issues are also welcome.
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