Carbon risk and corporate investment: A cross-country evidence

Dinh Phan (), Vuong Thao Tran, Tee Chwee Ming and Anh Le

Finance Research Letters, 2022, vol. 46, issue PB

Abstract: This paper investigates the effect of carbon risk on corporate investment using data from 41 countries for the period 2002–2017. There is strong evidence showing that the impact of carbon risk on corporate investment is negative and statistically significant. Carbon risk also reduces investment inefficiency. We find that carbon-intensive firms are affected more severely compared to carbon-non-intensive ones. Further, the effect depends on the level of a firm's financial constraints, where it is stronger in firms with financial constraints measured by firm size, age, KZ index, and dividend payout policy. Our findings remain consistent in several robustness tests.

Keywords: Climate risk; Carbon emission; Corporate investment; Financial constraints (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321003780

DOI: 10.1016/j.frl.2021.102376

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