How Does Climate Policy Uncertainty Affect Corporate Risk-Taking

Jinru Xu ()
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Jinru Xu: Southwestern University of Finance and Economics

A chapter in Proceedings of the 2025 7th International Conference on Economic Management and Cultural Industry (ICEMCI 2025), 2025, pp 408-419 from Springer

Abstract: Abstract Amid intensifying global climate challenges, governments have introduced various climate policies. However, considerable uncertainty often emerges during the transition from policy formulation to implementation, potentially exerting adverse effects on corporate behavior. Using panel data from China’s publicly listed A-share enterprises, this study examines the relationship between climate policy uncertainty (CPU) and corporate risk-taking. The findings indicate higher CPU significantly curbs firms’ risk-taking behavior by tightening financial constraints, delaying investment, and discouraging engagement in high-risk projects. Further analysis shows financial flexibility and strong ESG performance can partially offset these negative effects. According to heterogeneity testing, non-state-owned businesses, companies in highly competitive industries, and companies with a dual CEO are more likely to experience the dampening effect of CPU. These results contribute to the understanding of how CPU shapes corporate behavior and highlight the importance of improving policy predictability and promoting internal resilience mechanisms to support firms in navigating the risks associated with climate transitions.

Keywords: Climate Policy Uncertainty; Risk-Taking; Financial Constraint (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-888-2_40

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DOI: 10.2991/978-94-6463-888-2_40

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