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The Financial Impact of Flood Disasters: Evidence from German Companies

Hauser, Lina Marie LU (2025) NEKP01 20251
Department of Economics
Abstract
This paper investigates how firms and financial markets respond to extreme
weather events, using the flood in 2021 in Germany as a case study. An event study
is used to assess short-term stock market reactions for listed firms in affected regions.
The results show a significant and persistent decline in stock prices, suggesting that
investors initially underreacted to the disaster. A difference-in-differences approach
is then used to evaluate medium-term changes in firm-level financial indicators.
Firms located in flood-affected regions appear to have increased their cash holdings
and debt levels after the flood, likely as a precautionary response to heightened
uncertainty. However, these effects are only weakly statistically... (More)
This paper investigates how firms and financial markets respond to extreme
weather events, using the flood in 2021 in Germany as a case study. An event study
is used to assess short-term stock market reactions for listed firms in affected regions.
The results show a significant and persistent decline in stock prices, suggesting that
investors initially underreacted to the disaster. A difference-in-differences approach
is then used to evaluate medium-term changes in firm-level financial indicators.
Firms located in flood-affected regions appear to have increased their cash holdings
and debt levels after the flood, likely as a precautionary response to heightened
uncertainty. However, these effects are only weakly statistically significant and vary
across model specifications. The paper contributes to the growing literature on cli-
mate finance and firm-level response to extreme weather events in Germany. (Less)
Please use this url to cite or link to this publication:
author
Hauser, Lina Marie LU
supervisor
organization
course
NEKP01 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Floods, Germany, Climate Change, Stock Market, Firm Performance
language
English
id
9197167
date added to LUP
2025-09-12 10:52:30
date last changed
2025-09-12 10:52:30
@misc{9197167,
  abstract     = {{This paper investigates how firms and financial markets respond to extreme
weather events, using the flood in 2021 in Germany as a case study. An event study
is used to assess short-term stock market reactions for listed firms in affected regions.
The results show a significant and persistent decline in stock prices, suggesting that
investors initially underreacted to the disaster. A difference-in-differences approach
is then used to evaluate medium-term changes in firm-level financial indicators.
Firms located in flood-affected regions appear to have increased their cash holdings
and debt levels after the flood, likely as a precautionary response to heightened
uncertainty. However, these effects are only weakly statistically significant and vary
across model specifications. The paper contributes to the growing literature on cli-
mate finance and firm-level response to extreme weather events in Germany.}},
  author       = {{Hauser, Lina Marie}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Financial Impact of Flood Disasters: Evidence from German Companies}},
  year         = {{2025}},
}