Strategy choices in strategic risk-taking: Does climate risk matter?

Wanli Li, Dan Luo and Teng-Yuan Cheng

International Review of Financial Analysis, 2025, vol. 97, issue C

Abstract: This study examines how climate risks influence strategic risk-taking and corporate decision-making. Using listed manufacturing companies between 2008 and 2021 in China and combining resource-based theory and significance theory, we find that climate risk exposure significantly diminishes firms' overall strategic risk-taking by depleting financial resources. We also discover strategic adaptations in firms' investment behaviors that while physical climate risks significantly reduce capital expenditures, they do not have a similar impact on R&D expenditures. It reveals a marked increase in innovations related to climate risk alongside a decline in investments in other innovation areas. The heterogeneity analysis indicates that firms' internal risk diversification capacity and slack resources can affect the impact of climate risk on strategic risk-taking. Furthermore, climate risk will undermine long-term value by dampening strategic risk-taking. These findings indicate that it is important to integrate climate risk management into corporate strategic planning to ensure the sustainable growth of business value in the long term.

Keywords: Climate risk; Strategic risk-taking; Capital expenditure; Innovation (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521924007932
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:97:y:2025:i:c:s1057521924007932

DOI: 10.1016/j.irfa.2024.103861

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().