Going with the flow or standing by: Managerial climate risk perception bias and corporate green transformation — Evidence from China

This study introduces the concept of “bounded rationality” from behavioral economics into the analysis of corporate environmental strategies. By identifying biases in managerial perceptions of climate risk, it explores how such irrational cognition influences firms' green transformation. The findings reveal that managers who tend to overestimate climate risks are more inclined to “go with the flow,” actively promoting green transformation. When differentiating between types of perceptual bias, overestimation of climate risks is shown to facilitate green transformation, while underestimation hinders it. Corporate artificial intelligence innovation plays an asymmetric moderating role: it weakens the inhibitory effect of underestimation on transformation but having no impact on the transformation-promoting effect of overestimating risks. Mechanism analysis suggests that the impact of managerial climate risk perception bias on green transformation operates primarily through three channels: alleviating financing constraints, weakening profit-driven motives, and promoting green technological innovation. Furthermore, the effect is more pronounced in non-energy-intensive industries, regions with lower climate policy uncertainty, and firms with higher production efficiency. These findings offer a novel perspective for addressing global climate change and guiding corporate green transformation.