Green vs. brown: Climate risk showdown – who’s thriving, who’s diving?
研究中国上市公司如何通过现金流管理应对气候风险，发现棕色企业比绿色企业更积极调整，并分析行业、季节差异及经济后果。
• Analyzes corporate responses to climate risk through cash flow management of green and brown firms. • Brown firms show greater cash flow management sensitivity to climate risk than green firms. • Climate risk prompts firms to reduce financial leverage and operating costs. • Significant industry and seasonal effects of climate risk on firms’ financial strategies. • Brown firms respond aggressively to climate risk by improving market competitiveness and ESG performance. Increasingly complex climate change poses unprecedented risks and challenges. We attempt to analyze the strategic responses of firms in dealing with climate risk and whether green firms outperform brown firms by exploring the relationship between climate risk and firms’ cash flow. To this end, this paper uses the high-dimensional fixed-effects model for empirical analysis based on panel data of Chinese listed firms from Q1 2010 to Q4 2022. We find that firms have the motivation to hold more cash in the face of climate risk, and that brown firms will be more proactive in cash flow management compared to green firms. In addition, there are significant industry and seasonal effects of climate risk on firms’ cash flow. Mechanism tests find that climate risk prompts firms to increase cash flow by forcing them to reduce financial leverage and erode operating costs, as well as by inducing increased media attention to the firm. Heterogeneity analysis shows that the positive effect of climate risk on cash flow is more significant among low digital transformation firms, high financial constraints firms, firms with low managerial myopia, and SOEs. An analysis of the economic consequences shows that climate risk leads firms to be more aggressive in capturing market share, increasing productivity and strengthening ESG performance. The above findings help to enlighten firms on how to manage their risk exposures and adjust their internal governance structures as a way to maintain stable operations in an environment of intensified uncertainty. In brief, this paper highlights the differentiated financial decisions that green and brown firms make in response to climate risk, providing empirical evidence and policy implications for advancing the green transformation of firms.