Ecological risk management: Effects of carbon risk on firm innovation investment

Li, Fangmin; Goodell, John W.; Du, Anna Min; Yang, Tianle

Abstract

We investigate the impact of carbon risk on firms' innovation investments. Using a two-way fixed-effects panel regression with a panel dataset of Chinese listed firms for 2018–2021, we find that carbon risk inhibits firms' innovation investments. We also confirm the U-shaped relationship between carbon risk and innovation investment over the long term. We further reveal the conditioning roles of financial constraints, new investments, and carbon information disclosure at the firm level. Additionally, we find that firms' environmental awareness alleviates the impact of carbon risk on innovation investment. The results of this study have implications for firm managers, encouraging them to integrate carbon risk considerations when making the decision to promote firm innovation.

Citation

Li, F., Goodell, J. W., Du, A. M., & Yang, T. (2024). Ecological risk management: Effects of carbon risk on firm innovation investment. International Review of Financial Analysis, 95(Part B), Article 103514. https://doi.org/10.1016/j.irfa.2024.103514

• Journal Article Type: Article
• Acceptance Date: Jul 26, 2024
• Online Publication Date: Jul 28, 2024
• Publication Date: 2024-10
• Deposit Date: Aug 20, 2024
• Publicly Available Date: Jul 29, 2026
• Print ISSN: 1057-5219
• Electronic ISSN: 1873-8079
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 95
• Issue: Part B
• Article Number: 103514
• DOI: https://doi.org/10.1016/j.irfa.2024.103514
• Keywords: Ecological risk management, Carbon risk, Innovation investment, Financial constraints, Environmental awareness