How Does Carbon Market Affect Corporate Risk-Taking? — Evidence from China

Abstract

China’s newly launched national carbon emission trading market is attracting attention from all parties. Taking the corporate behavior as an entry point, this paper studies the impact of this carbon market on corporate risk-taking by constructing the difference-in-differences (DID) model. We find that the running of the national carbon market significantly increases participating companies’ risk-taking. Meanwhile, this positive effect is more pronounced for state-owned enterprises and those with longer operating. Further research examines the moderating effects of the constraint and incentive channels. The results indicate that, when participating in the national carbon market, firms with lower financing constraints or stronger internal incentives are more willing to take risks.

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