The Impact of Climate Risk on Corporate Financialization—Based on Empirical Evidence of Chinese A-Share Listed Companies

Abstract

Climate risk, as a significant factor affecting human sustainable development, has emerged as a focal topic of concern for governments and all sectors of society. Using a dataset from China’s Shanghai and Shenzhen A-share markets spanning 2007 to 2019, this study empirically examines how climate risk influences corporate financialization. The empirical results show that heightened climate risk significantly reduces the level of corporate financialization, a finding that remains robust across multiple tests. Further heterogeneity analyses indicate that the suppressive effect of climate risk is particularly evident among state-owned enterprises, firms operating in intensely competitive industries, and those located in regions subject to more stringent environmental policies. Mechanism analysis suggests that climate risk inhibits corporate financialization primarily by intensifying firms’ financing constraints while simultaneously stimulating their innovation capacity. These findings imply that corporate financialization in China is largely driven by profit-maximizing behaviors rooted in “investment substitution” and “real-sector intermediation” motives. Collectively, this research enhances understanding of the channels through which climate risk impacts corporate financial behavior and offers valuable empirical insights for policymakers aiming to optimize climate regulations and redirect financial resources toward productive real-sector activities.