Not all climate risks are alike: Heterogeneous responses of financial firms to natural disasters in China

This paper explores the capital market responses of financial firms to natural disasters in China. Using the event study approach, we demonstrate that the capital market responses of financial firms vary to the type of natural disaster. These heterogeneous responses are also affected by the type of financial firm. Security companies are generally more sensitive to all types of disasters and have statistically significant negative abnormal returns. Banks only respond to earthquakes, whereas insurance companies have generally insignificant cumulative abnormal returns to all three type of natural disasters.

Automated summary

This paper examines how financial firms in China respond to natural disasters in the capital market. Using the event study approach, the study finds that financial firms exhibit varying responses depending on the type of natural disaster. These responses are also influenced by the type of financial firm. Security companies are more sensitive to all types of disasters and experience statistically significant negative abnormal returns. Banks only respond to earthquakes, while insurance companies generally have insignificant cumulative abnormal returns to all three types of natural disasters.