Carbon Risk and Capital Mismatch: Evidence from Carbon-Intensive Firms in China

Changjiang Zhang, Sihan Zhang (), Chunyan Zhao and Bing He
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Changjiang Zhang: School of Economics and Management, Nanjing Tech University, Nanjing 211816, China
Sihan Zhang: School of Economics and Management, Southeast University, Nanjing 211189, China
Chunyan Zhao: School of Economics and Management, Nanjing Tech University, Nanjing 211816, China
Bing He: School of Business, Jiangsu Ocean University, Lianyungang 222005, China

Sustainability, 2025, vol. 17, issue 14, 1-18

Abstract: Emerging economies such as China have benefited from rapid growth but now face acute carbon risk amid worsening environmental conditions. Carbon-intensive firms—major emitters—face rising carbon risk that pervades operations and threatens efficient capital allocation. To advance global climate-change mitigation, help China meet its dual-carbon goals, and enhance corporate financial sustainability, we analyze panel data on 575 Chinese carbon-intensive companies from 2012 to 2022 and estimate OLS models to assess how carbon risk influences capital mismatch. Results show that higher carbon risk significantly widens capital mismatch, whereas higher media attention and better corporate governance each weaken this effect. These findings suggest that regulators and the media should monitor carbon-intensive firms more closely to improve information transparency and guide capital to its most productive uses, while firms themselves need to strengthen governance to limit the damage carbon risk inflicts on capital allocation.

Keywords: carbon risk; capital mismatch; media attention; corporate governance level; carbon-intensive firm (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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