Climate risk and stock price stability: A profitability and financial leverage perspective
Abstract
Using panel data on Chinese listed firms from 2004 to 2023, this paper examines the relationship between climate risk and stock price stability. The results show that rising climate risk significantly undermines stock price stability. Mechanism analysis indicates that this adverse effect operates primarily through reduced profitability and increased financial leverage. Meanwhile, total factor productivity effectively mitigates the negative effects of climate risk on firms and capital markets. Further heterogeneity analysis reveals substantial cross-firm differences: among firms with higher levels of greening transformation and greater monopoly power, the stock price volatility induced by climate risk is markedly attenuated.
Fields of Study & Subjects
Sustainable Finance and Green Bonds
Auditing
Earnings Management
Governance
Financial Markets and Investment Strategies
Publication details
- Journal / source
- International Review of Economics & Finance
- Publisher
- Elsevier BV
- Volume
- 108
- Pages
- 105227–105227
- Publication date
- 9 April 2026
- Language
- EN