Carbon policy risk and corporate capital structure decision

Hao SHU, Weiqiang TAN, Ping WEI

Research output: Contribution to journalArticlespeer-review

10 Citations (Scopus)


This study examines the relationship between carbon policy risk and corporate capital structure in China. Using a sample of A-share listed firms from 1997 to 2018, we find that carbon policy risk reduces firms' financial leverage. The result is robust to the introduction of difference-in-differences tests, instrumental variable regression, and a placebo test used to address endogeneity, as well as to other tests of alternative measures. This negative relationship is more pronounced for non-state-owned enterprises, firms with low institutional investor ownership, firms with poor corporate social responsibility performance, firms belonging to competitive or carbon-sensitive industries, and firms located in provincial cities. Financing constraints, bankruptcy risk, and government power are potential mechanisms underlying this observation. Our findings provide practical suggestions through which firms can address carbon policy risk and provide guidance to governments and regulators for the further implementation of environmental policies. Copyright © 2023 Elsevier Inc.
Original languageEnglish
Article number102523
JournalInternational Review of Financial Analysis
Early online dateJan 2023
Publication statusPublished - Mar 2023


Shu, H., Tan, W., & Wei, P. (2023). Carbon policy risk and corporate capital structure decision. International Review of Financial Analysis, 86. Retrieved from


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