UBC Theses and Dissertations

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UBC Theses and Dissertations

Essays on environmental and social issues Xiao, Zhanbing


Environmental and social (E&S) issues have attracted increasing attention from academics and practitioners. This thesis is a collection of two essays that examine firms’ efforts in these issues and the relevant value implications. The first essay documents a labor channel of firms’ exposure to climate change and studies how firms respond to climate-induced rising labor costs. I focus on firms’ use of outdoor workers and document two channels through which climate change contributes to rising labor costs: physical risk - lower labor supply and productivity in high temperatures; regulatory risk - governments introducing regulations to protect workers against heat hazards. I find that firms exposed to climate change through the labor channel have higher capital-labor ratios, especially when managers believe in climate change or when jobs are easy to automate. After experiencing shocks to physical (abnormally high temperatures) and regulatory (the adoption of the Heat Illness Prevention Standard (HIPS) in California) risks, high-exposure firms switch to more capital-intensive production functions. These firms also respond by innovating more, especially in technologies facilitating automation and reducing labor costs. Furthermore, labor exposure to climate change impedes job creation and hurts workers’ earnings. Overall, the findings highlight that climate change accelerates automation in occupations exposed to rising temperatures. The second essay provides evidence supporting the cash flow channel through which firms’ E&S investments increase value. Using Safegraph’s daily foot-traffic data at the store level, we find a significant decrease in a firm’s store visits following the firm’s violation of E&S standards. The decrease in visits by more E&S-conscious households is nearly four times greater than that by less E&S-conscious households. The reduction in store visits is associated with a reduction in firm sales. On average, one additional E&S incident is associated with a loss of $19.2 million in more E&S-conscious areas and a loss of $9.6 million in less E&S-conscious areas. The findings imply that good E&S performance can enhance firm value by attracting consumers and increasing sales.

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Attribution-NonCommercial-NoDerivatives 4.0 International