Research on the Dual Effects of Corporate Physical and Transition Climate Risks on Total Factor Productivity

This study empirically investigates the impacts of corporate climate risk, physical climate risk, and transition climate risk on firms’ total factor productivity (TFP), along with their underlying mechanisms, by employing a panel multidimensional fixed-effects model. The sample comprises Chinese listed companies spanning the period from 2007 to 2022. The findings reveal a significant positive effect of corporate climate risk and transition climate risk on corporate TFP, whereas physical climate risk exerts a substantial negative impact. Specifically, corporate climate risk and transition climate risk enhance TFP by elevating green technological innovation levels. Conversely, physical climate risk amplifies financing constraints, thereby diminishing TFP. Notably, these effects are accentuated in firms with higher return on assets, superior internal control quality, and greater institutional investor ownership, particularly among heavily polluting enterprises. Furthermore, while the positive effects of corporate climate risk and transition climate risk on TFP persist with a four-year lag, the negative impact of physical climate risk on TFP diminishes and becomes statistically insignificant over the same period.