From crisis to climate: Geopolitical turbulence, climate change exposure, and managerial ownership

We explore how geopolitical risk shapes firm-specific exposure to climate change, utilizing innovative text-based measures for both variables. Our analysis reveals that elevated geopolitical risk leads to a significant reduction in firms’ climate change exposure, suggesting that external shocks can spur organizational adaptation. The robustness of these findings is confirmed through a range of empirical checks, including propensity score matching, entropy balancing, and instrumental variable analysis. Further, we show that firms with larger cash reserves or greater R&D intensity tend to be less responsive to increases in geopolitical risk. Crucially, the reduction in climate change exposure is also less pronounced in firms with higher managerial ownership, underscoring the pivotal role of governance in guiding corporate responses to global risks.