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Environmental reputation and bank liquidity: Evidence from climate transition

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  • Daewoung Choi
  • Yong Kyu Gam
  • Hojong Shin

Abstract

This study empirically investigates how a bank's nonfinancial signals of environmental reputation affect its deposits and credit provision in US counties with severe climate transition risks. We find that banks with higher reputational risks associated with environmental issues tend to experience declining deposits in counties exposed to severe climate change risks. Banks with a poor environmental reputation also reduce mortgage origination in such counties and diminish liquidity creation if they have high deposit shares in counties sensitive to climate transition. This study suggests that a bank's reputation regarding environmental, social and governance practices is an important underlying cause of bank liquidity in areas sensitive to climate change.

Suggested Citation

  • Daewoung Choi & Yong Kyu Gam & Hojong Shin, 2023. "Environmental reputation and bank liquidity: Evidence from climate transition," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(7-8), pages 1274-1304, July.
    • Handle: RePEc:bla:jbfnac:v:50:y:2023:i:7-8:p:1274-1304
    DOI: 10.1111/jbfa.12669
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