Carbon emissions and default risk: International evidence from firm-level data

Kabir, Md. Jahangir; Rahman, Sohanur; Rahman, A.F.M. Ataur; Anwar, Mumtaheena

doi:10.1016/j.econmod.2021.105617

Cited by 67 publications

(37 citation statements)

References 70 publications

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“…They find that high carbon emissions and high carbon intensity of a firm can lead to increased default risk, especially after the adoption of the Paris Agreement. In related work, Kabir et al [10] analyse the relationship between carbon emissions and default risk with a broader and more representative sample of 2785 firms worldwide from 2004 to 2018. They also show a significant positive impact of carbon emissions on firms' default risk, indicating that firms with greater carbon risk exposure are more likely to default on their debts.…”

Section: Carbon and Firm Riskmentioning

confidence: 99%

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Firms and climate change: a review of carbon risk in corporate finance

Wang

Zhang

2022

Carb Neutrality

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This paper provides an overview of financial economics-based research on carbon risk with an emphasis on corporate finance. In the corporate finance literature, carbon risk refers to the impact of society’s transition to a low-carbon economy on firm value due to tightening regulations, changing consumer preferences, reputational damage, etc. We focus on the links between carbon risk and different firm performance factors, such as firm risk, cost of capital, financial performance, firm value, and corporate decisions. Although research on carbon risk is still emerging in the corporate finance field, the amount of literature on this topic has been increasing, especially in the last 2 years. We find that some results are robust, while others are mixed. This indicates that conflicting hypotheses still exist, leading to a need for more in-depth exploration.

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Section: Carbon and Firm Riskmentioning

confidence: 99%

“…In addition to suggesting associations or causal relations, many of these studies help explain why firms' carbon risk positively relates to their default risk (e.g., Kabir et al [10]). First, in the transition to a low-carbon economy, new regulations are enacted and enforced.…”

Section: Carbon and Firm Riskmentioning

confidence: 99%

Firms and climate change: a review of carbon risk in corporate finance

Wang

Zhang

2022

Carb Neutrality

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“…Under the goal of global carbon reduction, carbon emissions have gradually become one of the focal topics in academia. The accounting for carbon emissions (Kabir et al, 2021;Zhao et al, 2021), spatial layout of carbon emissions (Chen et al, 2021), carbon emission forecast (Gao et al, 2021), the carbon reduction effect of carbon tax (Liu et al, 2021), economic impact (Peng et al, 2021) and policy effects of carbon emissions (Xu, 2021;Wakiyama and Zusman, 2021) have received extensive attention. In addition, there are also some studies exploring the relationship between industrial transfer and carbon emissions.…”

Section: Literature Reviewmentioning

confidence: 99%

Factor Mobility, Industrial Transfer and Industrial Carbon Emission: A Spatial Matching Perspective

Zheng

Yang

2022

Front. Environ. Sci.

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This paper proposes a dynamic industrial transfer index for the first time to characterize the spatial matchability of factor mobility and industrial transfer, and then explores the correlation between factor mobility, industrial transfer and industrial carbon emission intensity by using panel data from 30 provinces in China during 2004–2019. The results show that China’s ability to reduce carbon emissions is improving, and the intensity of industrial carbon emission has dropped by 44.84%. In addition, there is an obvious spatial mismatch between factor mobility and industrial transfer. Specifically, production factors generally flow from high-carbon emission intensity areas to low-carbon emission intensity areas, while the direction of industrial transfer is generally opposite to that of factor mobility. And the empirical analysis finds that the interaction between factor mobility and industrial transfer will affect the carbon reduction. If the direction of capital mobility is the same as that of capital-intensive industries, it is unfavorable to the carbon emission reduction. While the carbon reduction effect will be enhanced if the directions of labor and technology mobility are consistent with those of labor-intensive and technology-intensive industrial transfer, respectively. Finally, based on the findings, some recommendations are provided for governments to formulate policies.

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“…Prior literature investigates the impact of carbon emissions on various attributes of firms [8][9][10]. For instance, Jung et al [11], Kim et al [9], and Li et al [12] examined the impact of firms' carbon emissions on the cost of bank debt financing for Australian firms and found a positive association between them.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Similarly, Chapple et al [16] for a sample of 58 Australian listed firms, Griffin et al [17] and Matsumura et al [18] for S&P 500 firms, Johnston et al [19] in the context of US electric firms, Lee et al [20] using a sample of 362 firms, and Wen et al [6] for Chinese corporate entities show that firms' carbon emissions reduce equity value. Kabir et al [8] provide evidence that carbon emissions increase firms' credit risk, which, in turn, lowers the credit rating of carbon-intensive firms [21].…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Carbon Emissions and Firm Performance: Evidence from Financial and Non-Financial Firms from Selected Emerging Economies

2021

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This paper examines the effects of carbon emissions on the accounting and market-based performance of financial and non-financial firms in emerging economies. Data for 104 financial and 328 non-financial firms constituting 2591 observations operating in 22 emerging economies were collected from the Datastream database for the period 2011–2020. We applied OLS and 2SLS regression techniques to analyze the data. Results show that financial firms emit less carbon than their non-financial counterparts. The results further show that carbon emissions reduce firms’ return on equity, Tobin’s Q, Z-score, and credit rating. Our findings remain robust in different estimation techniques and alternative proxies of performance. Our results have some important policy implications for emerging economies.

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Carbon emissions and default risk: International evidence from firm-level data

Cited by 67 publications

References 70 publications

Firms and climate change: a review of carbon risk in corporate finance

Firms and climate change: a review of carbon risk in corporate finance

Factor Mobility, Industrial Transfer and Industrial Carbon Emission: A Spatial Matching Perspective

Carbon Emissions and Firm Performance: Evidence from Financial and Non-Financial Firms from Selected Emerging Economies

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