The Impact of Climate Risk Information Disclosure on Corporate Financing Costs: Evidence From Textual Analysis of Listed Companies' Annual Reports

ABSTRACT This study examines the effect of climate risk information disclosure on corporate debt financing costs in the context of China's low‐carbon transition. Using a panel of Chinese A‐share listed firms from 2013 to 2021, we construct a localized climate risk disclosure index based on Word2Vec and textual analysis of annual reports. The results show that higher‐quality climate risk disclosure significantly lowers firms' debt financing costs. Mechanism analyses indicate that this effect operates through reduced information asymmetry, driven by stronger external supervision and improved internal governance. Further analyses reveal that the effect is more pronounced for state‐owned enterprises, firms in heavy‐polluting industries, and companies led by executives without environmental backgrounds. Moreover, transition risk disclosures exert a stronger cost‐reducing effect than physical risk disclosures. Overall, this study provides micro‐level evidence on the financing implications of climate risk communication and offers policy insights for improving climate disclosure frameworks in emerging markets.