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The extreme event of climate change: How digital transformation affects the performance of commercial banks?

Author

Listed:
  • Sun, Wujun
  • Zhai, Yujia
  • Li, Ruihai
  • Wang, Xuewu

Abstract

This paper investigates how digital transformation moderates the adverse impact of climate risks on commercial bank performance, using a panel dataset of 187 Chinese commercial banks from 2012 to 2021. The results reveal that heightened climate risks significantly reduce bank profitability and operational stability. However, digital transformation offsets these deleterious effects by lowering cost-to-income ratios and enhancing operational efficiency. A variety of robustness tests confirm the validity of the findings. Further heterogeneity analyses indicate that the mitigating role of digital transformation is more pronounced in developed regions and smaller banks. By explicitly linking climate risk and digital strategies, this study contributes to the growing literature on sustainable finance and risk management. The findings offer timely insights for policymakers and bank executives seeking to fortify financial institutions against climate disruptions, while highlighting the strategic value of digital investments for long-term resilience.

Suggested Citation

  • Sun, Wujun & Zhai, Yujia & Li, Ruihai & Wang, Xuewu, 2025. "The extreme event of climate change: How digital transformation affects the performance of commercial banks?," Energy Economics, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:eneeco:v:150:y:2025:i:c:s0140988325006103
    DOI: 10.1016/j.eneco.2025.108783
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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