Do bankers on board fulfill their role? Corporate social responsibility, environmental concerns and firm leverage

Abstract

AbstractUsing a dataset of listed Indian manufacturing firms for 2010–2020, the study examines their financial response to climate risks in the presence of banker‐directors. The results show that climate sensitivity and vulnerability exert a negative impact on firm leverage and cost whereas climate adaptation has relatively limited impact. These effects broadly resonate across firm ownership, although it differ across firm‐bank equity interlocks. The overall impact of these developments is manifest in a decline in investment. The findings suggest that policymakers need to be more responsive to firm‐bank interactions, as these can impact firm behavior and have real economic consequences.