Climate Risk and Corporate Debt Financing: Evidence from Chinese A-Share-Listed Firms

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

his study provides a valuable empirical exploration of the impact of climate risk on corporate debt financing in China, leveraging a comprehensive dataset and robust methodologies. The findings contribute to the growing literature on climate finance by highlighting mechanisms such as profitability erosion, revenue uncertainty, and financing costs. However, several areas require for enhancing the manuscript.

1. The paper uses the Germanwatch CRI as the proxy for climate risk but does not explicitly detail how this index is constructed or validated for the Chinese context. Given regional variability in climate risks, the authors should justify why this global index is appropriate for China and address potential discrepancies between national and subnational risk exposures.
2. The choice of regional carbon emission intensity and population density as IVs for climate risk needs further validation. Carbon intensity may directly correlate with industrial policies affecting financing, violating the exclusion restriction. The authors should provide empirical evidence or theoretical arguments to confirm that these IVs do not directly influence corporate debt financing beyond their association with climate risk.
3. While the study examines firm size, ownership, and climate-sensitive industries, the binary classification of "climate-sensitive industries" lacks nuance. A more granular classification (e.g., sector-specific risk exposure) or quantitative metrics (e.g., carbon intensity) would strengthen the heterogeneity analysis.
4. The literature review and the method should be improved and needs to add more the differences. The authors should add more recently published related papers about low-carbon development and climate policy as complementary references, such as: doi.org/10.3390/land14040682.
5. The mechanism tests (e.g., profitability, asset turnover) assume unidirectional causality from climate risk to financing. However, firms with weaker financial health might be more exposed to climate risks due to underinvestment in resilience. The authors should address potential reverse causality using Granger causality tests or additional lagged models.
6. The finding that environmental disclosure exacerbates short-term financing constraints under high climate risk contradicts existing literature. The authors should explore this counterintuitive result in depth, possibly by distinguishing between voluntary and mandatory disclosures or analyzing disclosure quality (e.g., specificity, transparency).
7. The analysis treats climate risk as a static annual variable, ignoring cumulative or lagged effects over multiple years. A dynamic model incorporating multi-year risk exposure or climate risk trends would better capture long-term impacts.
8. The policy recommendations are overly broad (e.g., "enhancing climate risk management"). The authors should propose actionable measures, such as integrating climate risk into credit rating systems or designing sector-specific green finance instruments, to align with their empirical findings.

 

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

This article examines the impact of climate risk on the debt financing of A-share listed companies in China, finding that climate risk significantly suppresses corporate debt financing. Climate risk affects corporate debt financing by weakening profitability, reducing asset turnover, increasing earnings uncertainty, and raising the cost of external financing. National climate risk response measures have mitigated the impact on short-term debt financing but have suppressed long-term debt financing. The research provides practical guidance for policymakers and businesses to address climate risk challenges. However, there are still some issues with the article.

Comment 1: In the introduction section, it is recommended to clearly state the research question, for example: "This article aims to explore how climate risk affects corporate debt financing capacity and analyze its mechanism of action." Additionally, although the introduction mentions the global impact of climate change and China's specific situation, it does not effectively connect this background to the research objectives. It is suggested to clearly explain how the research background leads to the research objectives. It is also recommended to fully explain the significance of this research.

Comment 2: In the literature review section, it is advisable to select more comprehensive literature, especially studies on the direct impact of climate risk on corporate debt financing capacity. Although some research on financing costs is mentioned, there are few direct studies cited on debt financing capacity. It is also suggested to further clarify the logical hierarchy of the literature review, for example, by segmenting according to different research directions or themes, making it easier for readers to understand. To address the issues mentioned and in line with the key topics of the article, the following articles are recommended for the author's reference:

Achieving synergy between carbon mitigation and pollution reduction: Does green finance matter? Journal of environmental management,2023,342, 118356-118356.

Corporate commitment to climate change action, carbon risk exposure, and a firm's debt financing policy. Business Strategy and the Environment,2021,30(8):3919-3936.

Comment 3: In the section on theoretical analysis and research hypotheses, although various mechanisms are analyzed, it could be further refined. For instance, specifically exploring the different impact paths of different types of climate risk (such as physical risk and transition risk) on corporate debt financing. Additionally, it is suggested to further delve into the specific impacts of climate risk on internal corporate operations, such as on supply chain management, production efficiency, and other aspects.

Comment 4: In the third section, the research design is relatively complete, but it could further explain the rationale and theoretical support for variable selection. For example, why specific control variables were chosen and how these variables affect the research results. Additionally, it is suggested to elaborate on the basis for model selection, such as why a specific regression model was chosen and how endogeneity issues are addressed. Consider adding interaction terms or conducting grouped regressions to better capture differences under varying conditions.

Comment 5: In the empirical analysis section, it is recommended to supplement the explanation of the economic significance of the regression results. For instance, detailing the specific extent of the impact of climate risk variations on corporate debt financing and the practical economic implications of these effects. Further discussion of the policy implications and practical significance of the results is also suggested, such as how policy interventions can mitigate the negative impact of climate risk on corporate debt financing.

Comment 6: In the heterogeneity test section, it is recommended to refine the grouping to explore whether there are differences in the impact of climate risk on corporate debt financing across different industries. Consider the impact of policy changes on corporate debt financing, such as whether there is a difference in the impact of climate risk on corporate debt financing before and after the implementation of carbon trading policies. This helps assess the effectiveness and timeliness of policies. In the further analysis section, data visualization techniques can be employed to create charts, intuitively displaying the differences in the impact of climate risk on corporate debt financing under different groupings. This aids readers in more clearly understanding the research findings.

Comments on the Quality of English Language

none

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

REVIEW

 

The authors of the manuscript "Climate Risk and Corporate Debt Financing: Evidence from Chinese A-Share Listed Firms" integrate data on climate risk and financial performance of Chinese companies listed on the Shanghai and Shenzhen Stock Exchanges to analyze how climate risk affects their ability to secure debt financing. This is an important topic as more businesses and economies need to adapt to climate risks and seek ways to mitigate their negative impacts. However, some aspects of the study could be expanded to achieve a broader and deeper picture.

Key questions and recommendations that, if approved by the authors, may be used:

1. The manuscript focuses solely on the Chinese context. While this is very important for understanding the dynamics of China's economy, it would be useful to suggest as a direction for future research to expand the geographical scope and include other markets. This would provide a broader perspective on the impact of climate risk on economies with different climatic conditions and financial characteristics.
2. I recommend adding a more detailed description of the sample of companies regarding the sectors and industries in which they operate. Expanding the analysis to different industries will provide a deeper insight into the opportunities for business adaptation. For example, industries such as the energy sector are more vulnerable to climate risks, which can have a serious impact on their financing capabilities.
3. I also recommend as a future direction for research to describe the possibility of expanding the hypotheses regarding the differences in the impact of climate risk on firms with different levels of technological maturity or innovation. Technologically advanced companies are likely to have greater flexibility in their adaptation to climate risks, which may make them less vulnerable to external climate factors.
4. The issue of political and regulatory initiatives could also be examined in more depth. National climate policies and corporate environmental disclosure play a key role in limiting the negative impact of climate risk on debt financing. Further analysis of the policy implications of climate risks and the options for regulating this risk in different industries could enrich the research.

The manuscript provides a significant contribution to the understanding of the impact of climate risk on corporate financing. However, to achieve broader and deeper conclusions, it is recommended to expand the scope of the study, as well as to add additional factors such as industry specificity and technological maturity. These, of course, can simply be mentioned at the end of the article as possible directions for future research. The manuscript requires minor revisions to enhance clarity, coherence, and applicability. I recommend accepting it after these corrections are made.

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

Accept in present form.

Reviewer 2 Report

Comments and Suggestions for Authors

Accept.