The Impact of Flooding on Firm Performance and Economic Growth

PLOS ONE, forthcoming

59 Pages Posted: 27 Jul 2022

See all articles by Xiaofei Pan

Xiaofei Pan

University of Wollongong

Buhui Qiu

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Date Written: May 2022

Abstract

Using comprehensive flood data from China, we find a significant, negative impact of flooding on firm performance, which is mainly driven by unexpected flooding. We use multiple identification strategies to address endogeneity concerns and find that the documented impact of flooding on firm performance is likely causal. The impact is more pronounced for firms with more tangible asset investment, firms located in cities with low government quality, firms facing tight financial constraints, firms controlled by non-government entities and firms with low geographic diversification. Flood-exposed firms react to the threat by altering their investment, financial, cash, payout and executive compensation policies. Finally, flooding also exerts a significant impact on local economic and employment growth.

Keywords: Flooding, Firm Performance, Firm Policies, Economic and Employment Growth

JEL Classification: Q51, G30, O44

Suggested Citation

Pan, Xiaofei and Qiu, Buhui, The Impact of Flooding on Firm Performance and Economic Growth (May 2022). PLOS ONE, forthcoming, Available at SSRN: https://ssrn.com/abstract=4154002 or http://dx.doi.org/10.2139/ssrn.4154002

Xiaofei Pan

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Buhui Qiu (Contact Author)

The University of Sydney - Discipline of Finance ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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