Carbon emissions and corporate long-term use of short-term debt behaviour: evidence from listed companies in China

Abstract

Although many studies have explored the impact of carbon emissions on corporate profitability, their implications for financing and investment behavior remain understudied. This study examines A-share listed firms in China to investigate the relationship between corporate carbon emissions and the long-term use of short-term debt (SDLI). Results show that a 1% increase in emissions leads to a 0.0158% rise in SDLI. Mechanism analysis suggests this is driven by reduced access to long-term debt and increased green innovation. The effect is stronger in financially constrained and private firms, but weaker in firms with environmentally aware management and stricter regional regulations. Further analysis reveals that a 1% increase in SDLI is associated with a 0.7183% decline in firm value and a 0.0223% increase in financial risk. This study is among the first to empirically link firm-level carbon emissions to debt maturity structure in a major emitting country. The findings contribute to the literature by revealing how carbon risk affects financing strategies, shifting the focus from profitability to balance sheet impacts. They also highlight the hidden financial costs of emissions and offer new insights at the intersection of environmental performance and corporate financial decision-making.