Will the China's carbon emissions market increase the risk-taking of its enterprises?

Abstract

This paper investigates the effect of carbon emissions trading in China on the corporate risk-taking level of enterprises involved. The empirical results show that: (a) after the building and running of the carbon emissions trading market, the level of corporate risk-taking of the involved enterprises will perform significant increase; (b) however, there is no evidence currently to show that the increasing corporate risk-taking level after the building of China's carbon emissions trading market results from improving the financing environment of the involved enterprises; (c) non-state-owned enterprises are more willing to take risks than state-owned enterprises (SOEs) when they are simultaneously involved in the carbon market; (d) younger and smaller enterprises are more likely to cope with the uncertainties of this cap-and-trade trading market positively. Our results are robust to a wide series of checks, and hold significant policy implications for enterprises to better cope with the in-depth development of the carbon market.