From cognition to action: climate risk perception and corporate capital structure optimization

As climate change intensifies and environmental regulations become more stringent, companies encounter heightened pressure to mitigate climate risks and enhance their capital structures. Drawing on the dynamic trade-off theory and using panel data from Chinese A-share listed firms from 2010 to 2023, this study examines the impact of climate risk perception on the speed of capital structure adjustment. The results show that climate risk perception significantly accelerates firms’ adjustment toward their target leverage, and hence improving capital structure optimization. Heterogeneity assessments reveal that this effect is particularly significant among enterprises with a greater number of financially experienced executives, robust internal controls, and in areas marked by elevated climate risk exposure and stringent environmental regulations. Mechanism tests further reveal that improvements in resource allocation efficiency, alleviation of financing constraints, and increased analyst coverage serve as key transmission channels. This study emphasizes the governance effect of climate risk perception in the optimization of corporate capital structures and offers new empirical evidence for corporate financial decision-making and climate finance governance.