Alternative Data Information on Climate Risk and Corporate Cash Holdings

This study investigates the association between firm-level climate risk exposure and corporate cash holdings, drawing on transcript-based climate measures constructed from earnings conference calls. These measures track the relative frequency of climate-related bigrams in quarterly transcripts, providing a forward-looking and firm-specific view of climate exposure that distinguishes between overall, regulatory, and physical dimensions. We further exploit the release of the Stern Review in 2006 as a common shock to climate awareness, using it as a conceptual test of whether greater climate salience amplifies the link between firm-level exposure and precautionary liquidity accumulation. Our findings show that firms with higher climate risk exposure maintain significantly larger cash reserves, consistent with a precautionary savings motive. Financially constrained firms exhibit a stronger response than their unconstrained counterparts, reflecting the interaction between climate uncertainty and financing frictions. The results also demonstrate how text-based alternative data derived from managerial disclosures can uncover firm-level climate exposure that aggregate proxies may fail to capture, with direct implications for research in emerging markets where conventional climate data are often limited.