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Corporate climate risk perception and debt concentration

Author

Listed:
  • Ma, Zhenbang
  • Xie, Yanxiang
  • Wang, Kai
  • Pu, Guifang

Abstract

Exploring the changes in firms’ debt structures by examining their debt concentrations, we found that a high corporate climate risk perception significantly reduces debt concentration. In such cases, the total amount of debt remains unaffected; however, the variety of debt types increases, trade credit and long-term borrowing increases while and short-term borrowing and lease liabilities decrease. And this effect is primarily driven by firms’ perception of climate transition risks rather than climate physical risks. Heterogeneity tests show that higher default risk, financial distress, and climate threats motivate firms to for debt restructuring. The economic consequence analysis reveals that lower debt concentration mitigates climate threats by reducing debt financing costs, enhancing green innovation, and improving ESG performance, underscoring the significance of corporate debt restructuring as a strategy for addressing climate risk.

Suggested Citation

  • Ma, Zhenbang & Xie, Yanxiang & Wang, Kai & Pu, Guifang, 2025. "Corporate climate risk perception and debt concentration," Finance Research Letters, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325002867
    DOI: 10.1016/j.frl.2025.107022
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    Keywords

    Corporate climate risk perception; Debt concentration; Risk diversification; Debt heterogeneity;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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