We study how the El Niño Southern Oscillation (ENSO) - a short-term, forecastable climate cycle with global weather impacts affects corporate operating performance using a cross-country sample. We find that conditions favoring La Niña, the ENSO ‘cold’ event, improve net income relative to neutral conditions. Management guidance revisions track ENSO forecast revisions, suggesting that firms are attentive to the information in ENSO forecasts. The tracking for analyst estimate revisions, however, appears incomplete for certain sectors and geographies. The forecasted component of ENSO has a generally larger effect on operating performance than the surprise component does, consistent with firms making operating adaptations based on ENSO forecasts.
| Speaker: | Dr Sorabh Tomar Assistant Professor, Southern Methodist University |
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