Tone Symphony in Climate‐Exposed Firms

ABSTRACT This study investigates how firm‐specific climate change exposure affects the communicative tone of management, using a comprehensive dataset of US‐listed companies over the 2001–2021 period. We find that firms with higher climate change exposure exhibit a more negative textual tone in their management's communication within SEC filings. These results remain robust across a variety of tests, including alternative econometric models, considerations of endogeneity, alternative proxies for managerial sentiment, and a series of split‐sample analyses. Also, we identify innovative corporate culture and industry concentration as strategic mechanisms through which firm‐level climate change exposure shapes managerial sentiment. Overall, our study indicates that fostering innovation and strategic industry positioning are essential strategies for mitigating the adverse effects of climate risk on management communications.