Climate risk as a catalyst for corporate borrowing: Evidence on the transition risk effect in Chinese listed companies

This study examines how climate risk affects corporate borrowing using firm-level climate risk measures constructed from textual analysis of annual reports. Using a sample of Chinese A-share listed firms from 2010 to 2023, we find that climate risk is positively associated with corporate borrowing, especially long-term borrowing. This association is mainly driven by climate transition risk, whereas physical climate risk shows no significant average effect on loan size. The positive climate risk-borrowing association is more pronounced among state-owned enterprises. Moderating-effect tests show that information transparency and institutional investor monitoring strengthen this relationship. Further analyses show that firms exposed to higher climate risk adjust their loan maturity structure toward long-term borrowing. Quantile regression results show that the positive association between climate risk and loan size becomes weaker at higher quantiles of the loan distribution for both comprehensive and transition risks, suggesting a diminishing marginal effect. Overall, the evidence suggests that climate transition risk reshapes firms' borrowing behavior by increasing long-term financing needs during low-carbon transformation. This study extends the climate finance literature by documenting how different dimensions of climate risk affect corporate debt financing in an emerging market where borrowing remains central to external finance.