“Not all climate risks are alike”: Heterogeneous responses of financial firms to natural disasters in China

Abstract

This paper explores the capital market responses of financial firms to natural disasters in China. Using the event study approach, we demonstrate that the capital market responses of financial firms vary to the type of natural disaster. These heterogeneous responses are also affected by the type of financial firm. Security companies are generally more sensitive to all types of disasters and have statistically significant negative abnormal returns. Banks only respond to earthquakes, whereas insurance companies have generally insignificant cumulative abnormal returns to all three type of natural disasters.