Climate Risk and Corporate Payout Policies around the World

Using a large sample of firms from 45 countries, we find that firms in countries with high climate risk reduce their cash dividends but increasingly use share repurchases to make payouts, suggesting that firms substitute dividends with repurchases to increase their payout flexibility in response to heightened climate risk. These results are robust after controlling for firm performance, cash holdings and various other firm and country characteristics. The effect of climate risk on payout policies is more pronounced for firms that are more vulnerable to climate risk and for those in countries where people pay more attention to climate change and the national culture emphasizes uncertainty avoidance and long-term orientation.