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Environmental Risk, Environmental Action, and Firm Value: Evidence From Climate‐Linked Contracts

Hsuan‐Lien Chu et al.

Australian Accounting Review2025https://doi.org/10.1111/auar.70010article
AJG 2ABDC B
Weight
0.37

Abstract

Based on a sample of public firms domiciled in 41 countries around the world, we find that firms facing a higher level of environmental risk are more likely to adopt climate‐linked contracts with quantitative targets. We also find that firms adopting climate‐linked contracts are more likely to take real actions to address their concerns about environmental risks. Finally, we present evidence suggesting that environmentally sensitive firms with climate‐linked contracts, particularly those involving real actions implemented after the adoption of such contracts, tend to have high firm value. Taken together, our results support the conjecture that effective climate‐linked contracting has a real and substantive impact on managerial decision‐making, which in turn reduces firms’ environmental risks and increases their value.

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https://doi.org/https://doi.org/10.1111/auar.70010

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@article{hsuan‐lien2025,
  title        = {{Environmental Risk, Environmental Action, and Firm Value: Evidence From Climate‐Linked Contracts}},
  author       = {Hsuan‐Lien Chu et al.},
  journal      = {Australian Accounting Review},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1111/auar.70010},
}

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Environmental Risk, Environmental Action, and Firm Value: Evidence From Climate‐Linked Contracts

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Evidence weight

0.37

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.16 × 0.4 = 0.06
M · momentum0.53 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.