Work

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

Year: 2025

Type: article

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.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.104066

Authors: Yong Wang, Chao Wang

Institution: China University of Petroleum, East China

Language: English

Topic: Firm Innovation and Growth

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $1,930