Extreme temperatures and the profitability of large European firms Articles uri icon

publication date

  • June 2025

start page

  • 1

end page

  • 22

volume

  • 11

Electronic International Standard Serial Number (EISSN)

  • 2949-7280

abstract

  • In this paper, we analyze the impact of temperature exposure on earnings per share of large European firms over the 21st century using panel data models. Our findings reveal that earnings are sensitive to extreme temperatures in a large proportion of sectors. Depending on the particular quarter of the year and sector, we observe impacts on profitability, which can be positive, negative, or both. Most of the effects of extreme temperatures are observed during the milder seasons of spring and autumn. Furthermore, we find a steady increase in investments in sectors that are negatively impacted by extreme temperatures, which grew from around 16 % in 2015 to more than 23 % in 2022. Finally, we find a higher percentage of sectors affected by exposure to extreme temperatures in Europe than that observed in other similar studies for the US.

subjects

  • Statistics

keywords

  • climate change; earnings per share; firm performance; physical risk; temperature exposure