How does biodiversity risk exposure affect corporate regulatory intensity?

• Firms exposed to biodiversity risk generally have higher regulatory intensity. • Cost of regulatory compliance is higher when firm is exposed to biodiversity risk. • The impact varies across sectors, but not related to firm scope. • The impact is less pronounced for firms in states with poorer institutional quality. • The impact is less pronounced for vertically integrated firms. This paper investigates the impact of biodiversity risk on corporate regulatory intensity of firms in the United States during 2007-2020. Using text-based measures of biodiversity risk and regulatory intensity extracted from corporate disclosures and public media, we provide empirical evidence of a positive impact of biodiversity risk exposure on corporate regulatory intensity. The finding suggests that more corporate exposure to biodiversity risk increases the regulatory intensity and cost of regulatory compliance. Further empirical analysis suggests that the impact of biodiversity risk exposure on regulatory intensity is less pronounced in firms with headquarters located in states with poorer institutions, and in vertically integrated firms.