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Managerial climate risk perception bias and corporate investment inefficiency: Evidence from Chinese listed firms

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  • Zhao, Yifan
  • Li, Jialong

Abstract

This paper investigates how managerial biases in perceiving climate risk affect corporate investment inefficiency. Using a sample of Chinese A-share listed firms from 2010 to 2022, we measure investment inefficiency based on the Richardson model and construct a proxy for managerial climate risk perception bias through textual analysis of annual reports combined with objective climate risk indicators. The empirical results show that greater perception bias significantly increases investment inefficiency. The effect is more pronounced for firms operating in eastern regions of China. Mechanism analysis reveals that managerial climate risk perception bias increases investment inefficiency through two channels: exacerbating financing constraints and distorting innovation expenditure. This study enriches the literature on behavioral finance by integrating managerial cognitive biases into the analysis of corporate investment inefficiency and provides policy implications for improving managerial risk awareness and enhancing firms’ long-term investment decisions.

Suggested Citation

  • Zhao, Yifan & Li, Jialong, 2026. "Managerial climate risk perception bias and corporate investment inefficiency: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finlet:v:90:y:2026:i:c:s1544612325026480
    DOI: 10.1016/j.frl.2025.109399
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