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Navigating the winds of change: climate policy uncertainty and corporate risk-taking

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  • Shanyong Wang

    (University of Science and Technology of China)

  • Rongwei Zhang

    (University of Science and Technology of China)

  • Yancheng Lai

    (University of Science and Technology of China)

Abstract

Climate policy uncertainty (CPU) significantly influences corporate decision-making and strategy. Nevertheless, the impact of CPU on corporate risk-taking propensity remains ambiguous. Using data from Chinese A-share listed firms (2002–2021), we find that CPU reduces corporate risk-taking, without evidence of an inverted U-shaped relationship. Channel analysis shows this effect is mediated through higher financing costs, reduced R&D investment, and increased managerial myopia. SOEs and firms with strong internal controls or high resilience are better able to withstand CPU’s adverse impacts. Advancements in green finance and competitive markets further mitigate these effects. However, heavy polluters must adapt their strategies to effectively cope with CPU.

Suggested Citation

  • Shanyong Wang & Rongwei Zhang & Yancheng Lai, 2025. "Navigating the winds of change: climate policy uncertainty and corporate risk-taking," Economic Change and Restructuring, Springer, vol. 58(3), pages 1-33, June.
    • Handle: RePEc:kap:ecopln:v:58:y:2025:i:3:d:10.1007_s10644-025-09885-0
    DOI: 10.1007/s10644-025-09885-0
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