How does carbon pressure affect corporate risk-taking? Evidence from Chinese energy firms

Different regions face heterogeneous carbon pressure, but the nexus of carbon pressure and corporate risk behaviour is less explored. Based on annual data from Chinese A-share listed energy firms over the time period 2008–2019, this study shows that carbon pressure can significantly promote the risk-taking of energy firms. Furthermore, government subsidies and tax burdens are essential factors in adjusting the effects of carbon pressure on energy firms’ risk-taking. We find that energy firms with high government subsidies and low tax burdens have a higher risk preference when faced with carbon pressure. In addition, the positive relationship between carbon pressure and risk-taking is stronger and more significant for energy firms from the eastern region and for those that are from non-high- and new-technology industries and non-new energy industries. The above findings provide a theoretical basis and practical reference for governments to adopt effective policies to promote energy firms’ sustainable development and for energy firms to devise smarter investment strategies when facing carbon pressure. Our research offers new insights into how carbon pressure influences energy firm behaviour at the micro-level in the context of climate change.