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

Using 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.