Pro-Climate Lobbying and Corporate Default Risk: Evidence from U.S. Firms
This study examines whether pro-climate lobbying intensity is associated with corporate default risk. Using a panel of 4176 firm-year observations from U.S.-listed firms, we measure financial stability using distance-to-default and pro-climate lobbying intensity as annual pro-climate lobbying expenditure scaled by total assets. Fixed-effects estimates show that pro-climate lobbying intensity is positively and significantly associated with distance-to-default, indicating lower default risk. Economically, a one-standard-deviation increase in lobbying intensity corresponds to an approximately 0.084-unit increase in distance-to-default, equivalent to 1.39% of its sample mean. The evidence is consistent with signaling theory, as costly climate engagement may signal transition preparedness, and with stakeholder theory, as alignment with climate-conscious stakeholders may lower regulatory, reputational, and financing risks. The relationship remains evident after entropy balancing, controlling for lagged distance-to-default in a dynamic specification, and replacing distance-to-default with the Altman Z-score. It is also qualitatively robust to replace the comprehensive lobbying measure with a narrower text-based proxy that identifies pro-climate lobbying through explicit climate-related keywords. Split-sample analyses show a stronger association among firms with at-or-above-median environmental and social performance and among firms with at-or-above-median cash-flow and earnings volatility, suggesting that climate-policy engagement is most informative under greater operating uncertainty; these patterns remain descriptive pending formal coefficient-comparison tests. Overall, the study contributes to the corporate political activity, climate-finance, and credit-risk bodies of literature by showing that pro-climate lobbying carries information relevant to financial resilience and that its relevance varies with firms’ sustainability performance and operating uncertainty.
Authors
- Iftear Ahmed Chowdhury
- Mohammad Sarwar Rekabder (ORCID: https://orcid.org/0000-0002-4485-9920)
- FJ Mohaimen (ORCID: https://orcid.org/0000-0002-6364-8416)
- Jobaida Tasnim Chowdhury
- Hasan Al Mamun (ORCID: https://orcid.org/0009-0003-4765-1150)
Institutions
- North South University (BD)
Publication Details
- Journal
- Journal of risk and financial management
- Published
- 2026-09-30
- DOI
- https://doi.org/10.3390/jrfm19100748
- Primary Topic
- Corporate Social Responsibility Reporting
- Type
- article
- Field-Weighted Citation Impact
- 0.00