Work

Carbon risk and corporate cost stickiness

Year: 2026

Type: article

Abstract: Cost stickiness reflects a firm’s efficiency in allocating production resources, including capital, labour, and technology, whereas carbon risk influences the effectiveness of such resource allocation. Using a sample of China’s A-share listed companies from 2012 to 2022, this study investigates the impact of carbon risk on corporate cost stickiness and explores the underlying mechanisms. The empirical results show that carbon risk significantly reduces corporate cost stickiness. Further analysis indicates that financial constraints, environmental regulation (ER), and managerial overconfidence (OC) serve as the primary channels through which carbon risk influences cost stickiness. Additional findings reveal that the inhibitory effect of carbon risk on cost stickiness is more pronounced in firms operating in heavily polluting industries, industries characterized by intense competition, non–state-owned enterprises (non-SOEs), and firms with higher levels of transparency. Overall, these findings deepen the understanding of the economic consequences associated with carbon risk and provide important insights for firms seeking to enhance cost management efficiency and optimize resource allocation in the context of increasing carbon-related risks.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2026.105120

Authors: Tingwei Luo, Min Liao, Fubi Luo

Institutions: Australian National University, Chongqing Normal University

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Climate action, Decent work and economic growth

Open Access status: gold

Estimated APC paid: $1,930