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Carbon risk and firm performance: Evidence from a quasi-natural experiment

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  • Justin Hung Nguyen

Abstract

This article examines the effect of carbon risk on firm performance, exploiting the Australia ratification of Kyoto Protocol in December 2007 as an exogenous shock. The article finds that polluters, firms in highest-emitting industries, experience a reduction in financial performance relative to controlling non-polluters subsequent to the ratification, and the effect is more pronounced among financially constrained firms. The results are robust to various definitions of polluters, measures of financial constraints, falsification tests on the timing of the Kyoto adoption and the impact of the Global Financial Crisis. The evidence suggests a negative association between carbon risk and firm performance.

Suggested Citation

  • Justin Hung Nguyen, 2018. "Carbon risk and firm performance: Evidence from a quasi-natural experiment," Australian Journal of Management, Australian School of Business, vol. 43(1), pages 65-90, February.
    • Handle: RePEc:sae:ausman:v:43:y:2018:i:1:p:65-90
    DOI: 10.1177/0312896217709328
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    Cited by:

    1. Miriam Breitenstein & Duc Khuong Nguyen & Thomas Walther, 2021. "Environmental Hazards And Risk Management In The Financial Sector: A Systematic Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 512-538, April.
    2. Balachandran, Balasingham & Nguyen, Justin Hung, 2018. "Does carbon risk matter in firm dividend policy? Evidence from a quasi-natural experiment in an imputation environment," Journal of Banking & Finance, Elsevier, vol. 96(C), pages 249-267.
    3. Natalya Ayzenberg & Igor Bykadorov & Sergey Kokovin, 2018. "Optimal Reciprocal Import Tariffs Under Variable Elasticity Of Substitution," HSE Working papers WP BRP 204/EC/2018, National Research University Higher School of Economics.

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    More about this item

    Keywords

    Carbon policy; carbon risk; difference-in-differences; financial constraint; financial performance; quasi-natural experiment;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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