Does Climate Risk Affect Employment Decisions? International Evidence

ABSTRACT This study investigates the effect of climate risk on corporate employment decisions. Using a large sample from 41 countries, we find a positive association between climate risk and underinvestment in labor, notably manifesting as excessive employee layoffs. This indicates that climate risk leads to suboptimal employment decisions through labor cost reduction to mitigate the impact on firm performance. However, firms with higher commitment to social responsibility exhibit less suboptima