Template-Type: ReDIF-Paper 1.0
Author-Name: Kiet Tuan Duong
Author-X-Name-First: Kiet Tuan
Author-X-Name-Last: Duong
Author-Email: kiet.duong@york.ac.uk
Author-Workplace-Name: School for Business and Society, University of York.
Author-Name: Luu Duc Toan Huynh
Author-X-Name-First: Luu Duc Toan
Author-X-Name-Last: Huynh
Author-Email: t.huynh@qmul.ac.uk
Author-Workplace-Name: School of Business and Management, Queen Mary University of London.
Title: Extreme weather and corporate fixed asset policies: leasing as alternative finance
Abstract: This paper investigates how weather-affected firms make decisions on fixed asset purchases and financing choices for fixed asset acquisition. Utilizing a unique dataset comprising over 26,000 firms across 40 countries, we find that weather-affected firms are more prone to purchase fixed assets, increasing investments in machinery, equipment, and real estate. These purchases are primarily financed through equity, bank loans, and government grants. Particularly, we find leasing is a vital fallback financing source for firms experiencing losses due to extreme weather. Firms that exclusively rely on leasing rather than other financial sources are more likely the ones that face significant external financing barriers, including complex loan procedures, high collateral requirements, and increased loan rejection rates. Interestingly, weather-affected firms who have successfully obtained non-leasing finance for fixed asset purchases, have a higher tendency to also engage in leasing, underscoring that such firms adopt flexible strategies for fixed asset acquisition.
Length: 41 pages
Creation-Date: 2024-03
Revision-Date: 
Publication-Status: 
Classification-JEL: E44, F33, G15, L72, Q31
Keywords: Extreme weather, Firm-level climate losses, Fixed assets, Financing decisions,
leasing, Financial obstacles
File-URL: http://cgr.sbm.qmul.ac.uk/CGRWP116.pdf
Number: 116
Handle: RePEc:cgs:wpaper:116