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Climate risk and firms’ R&D investment: Evidence from China

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  • Wang, Yong
  • Wang, Chao

Abstract

This paper investigates the impact of regional climate risk on firms' R&D investment using data from 23854 firm-year in China from 2008 to 2021. We find that regional climate risk has a significantly negative impact on firms' R&D investment, which shows that climate risk inhibits firms' innovation. In addition, the above-mentioned effect is more pronounced in firms with lower cash holdings and lower manager shareholdings. The mechanism analysis shows that climate risk reduces firms' R&D investment by lowering firms' profitability and exacerbating financing constraint. Further analysis based on China's institutional environment also shows that the above impact of climate risk on firms' R&D investment is more pronounced for firms with non-state property right and lower government subsidies.

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  • Wang, Yong & Wang, Chao, 2025. "Climate risk and firms’ R&D investment: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:reveco:v:99:y:2025:i:c:s1059056025002291
    DOI: 10.1016/j.iref.2025.104066
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