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Does carbon risk amplify environmental uncertainty?

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  • Gao, Bin
  • Zhang, Jinlong
  • Liu, Xiaofeng

Abstract

This paper uses the Carbon Emissions Trading (CET) as a quasi-natural experiment to empirically test the impact of carbon risk on enterprise environmental uncertainty from the perspective of policy regulation in China. Using data from A-share listed enterprises from CET-covered enterprises, this paper uses multiphase difference-in-differences (DID) strategy and finds that carbon risk amplifies the uncertainty of the enterprise environment. The test of the intermediary effect indicates that institutional ownership and the change of the shareholding ratio of the largest shareholder play a partial intermediary role between carbon risk and environmental uncertainty. In addition, the analysis of industry and enterprise heterogeneity reveals that the impact is more significant on enterprises in the oil industry, enterprises with high financing constraints and insufficient investment, and non-state-owned enterprises.

Suggested Citation

  • Gao, Bin & Zhang, Jinlong & Liu, Xiaofeng, 2023. "Does carbon risk amplify environmental uncertainty?," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 594-606.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:594-606
    DOI: 10.1016/j.iref.2023.06.037
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    References listed on IDEAS

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    1. Mara Faccio & Maria-Teresa Marchica & Roberto Mura, 2011. "Large Shareholder Diversification and Corporate Risk-Taking," The Review of Financial Studies, Society for Financial Studies, vol. 24(11), pages 3601-3641.
    2. Zhang, Cheng & Zhou, Bo & Tian, Xuan, 2022. "Political connections and green innovation: The role of a corporate entrepreneurship strategy in state-owned enterprises," Journal of Business Research, Elsevier, vol. 146(C), pages 375-384.
    3. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
    4. Philipp Krueger & Zacharias Sautner & Laura T Starks, 2020. "The Importance of Climate Risks for Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1067-1111.
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    Cited by:

    1. Liao, Tailai & Yan, Jingdong & Zhang, Qiuhong, 2024. "The impact of green technology innovation on carbon emission efficiency: The intermediary role of intellectual capital," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 520-532.
    2. Zhang, Jinlong & Wu, Mingyue & Chen, Tingwei & Gao, Bin, 2024. "Green credit, financing constraints, and corporate investment: From the perspectives of scale and efficiency," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    3. Banerjee, Ameet Kumar & Özer, Zeynep Sueda & Rahman, Molla Ramizur & Sensoy, Ahmet, 2024. "How does the time-varying dynamics of spillover between clean and brown energy ETFs change with the intervention of climate risk and climate policy uncertainty?," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 442-468.

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