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Does carbon risk travel along the supply chain? Evidence from corporate default risk

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  • Guo, Chenhao
  • Zhang, Sirui
  • Chen, Sian

Abstract

This study examines the effects of major customers’ carbon risk on the default risk of a firm. We find that a firm's default risk measured by distance-to-default is positively associated with its major customers’ carbon risk. Further analysis shows that this positive relationship is stronger for firms with weak fundamentals or heavy reliance on major customers. Our findings highlight the externality of carbon risk along the supply chains.

Suggested Citation

  • Guo, Chenhao & Zhang, Sirui & Chen, Sian, 2024. "Does carbon risk travel along the supply chain? Evidence from corporate default risk," Economics Letters, Elsevier, vol. 236(C).
    • Handle: RePEc:eee:ecolet:v:236:y:2024:i:c:s0165176524000855
    DOI: 10.1016/j.econlet.2024.111602
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    References listed on IDEAS

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    1. Zhou, Peng & Li, Xiang & Shi, Xing & Jiang, Kun, 2025. "Spillover of the carbon risk along the supply chain: Evidence from the U.S. corporate bond market," Journal of Business Research, Elsevier, vol. 201(C).
    2. Tian, Lihui & Wu, Haifeng & Zhu, Xiaoman, 2025. "Does climate risk perception drive the realization of corporate environmental responsibility?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 47(C).

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    Keywords

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    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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