Extreme sea levels and firm performance in the global maritime sector
Ray Anthony L. Almonares, Anutchanat Jaroenjitrkam, Sakkakom ManeenopPurpose
This study examines the effect of extreme sea level fluctuations on the performance of firms within the global maritime transportation sector.
Design/methodology/approach
We use quarterly financial data from 2002 to 2023, incorporating seaport operators and shipping companies in the sample, to employ a panel fixed-effects regression. We examine the effects of extreme global mean sea level (GMSL) fluctuations, both high and low, on firm performance. Tobin's Q serves as an indicator of firm valuation, return on assets (ROA) reflects operating performance, and quarterly stock returns denote investors' expectations of financial performance.
Findings
Extreme sea level variations adversely impact firm performance due to increased operational costs and disruptions. High extreme sea levels diminish ROA and stock returns, and low extreme sea levels primarily affect stock returns and firm value, as indicated by Tobin's Q. Our findings also suggest implications for firms to handle this uncertainty, that superior ESG performance mitigates the adverse impact of sea level variability on firm performance. However, internationalization fails to hedge against these physical climate risks effectively.
Originality/value
We contribute to the study of climate finance by expanding the existing literature on sea level rise, examining both high and low sea levels, and revealing asymmetric effects on financial performance. We also contribute to the emerging literature on climate change within the transportation sector by quantifying the impact of extreme sea levels on the financial performance of seaports and shipping companies.