Unraveling the impact of climate policy uncertainty on corporate default risk: Evidence from China

Junrong Liu, Guoying Deng, Jingzhou Yan and Shibo Ma

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: This paper examines the effect of climate policy uncertainty (CPU) on corporate default risk based on the comprehensive dataset of Chinese A-listed firms. Based on the empirical study, we document a significant positive impact of China’s CPU on the corporate default risk, and the impact sounds systematically aggravating with the increasing term structure of default investigation. Our research also reveals that R&D investment, ESG performance and firm financial constraints function as effective channels between climate policy uncertainty and firm default risk. Also, better local development and higher managerial climate attention have mitigating effects on the relationship between CPU and corporate default risk, while state ownership intensifies the effect of CPU on corporate default risk. These findings highlight the externality of climate policy risk on corporate default risk profile from the empirical perspective.

Keywords: Climate policy uncertainty; Corporate default risk; ESG; Managerial climate attention (search for similar items in EconPapers)
JEL-codes: G32 M14 Q54 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323007572

DOI: 10.1016/j.frl.2023.104385

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