---

Journal of Environmental Accounting and Management 14(2) (2026) 147--159 | DOI:10.5890/JEAM.2026.06.002

Shiyu Lu$^{1}$, Zixin Li$^{2}$, Bo Cheng$^{2}$

$^{1}$ School of Economics and Management, Zhejiang Sci-tech University, Hangzhou, China

$^{2}$ School of Accountancy, Nanjing Audit University, Nanjing, China

Download Full Text PDF

 

Abstract

Based on a quasi-natural experimental event that China signed the Paris Agreement in 2016, this paper uses a difference-in-difference (DID) model to systematically investigate the impact of rising carbon emission risk on firms' ESG rating and its mechanism. The results show the signing of the Paris Agreement significantly improves the ESG level of firms with high-carbon emission risk. Moreover, this positive effect occurs by increasing the level of corporate green innovation and the attention of analysts. Further heterogeneity analysis suggests that the policy effect is stronger for high-carbon emission firms that are non-state owned, media focused, and low market competition.

References

1. [1]	Gillan, S.L., Koch, A.L., and Starks, T. (2021), Firms and social responsibility: a review of ESG and CSR research in corporate finance, Journal of Corporate Finance, 66, 101889.

2. [2]	Duuren, E., Plantinga, A., and Scholtens, B. (2016), ESG integration and the investment management process: fundamental investing reinvented, Journal of Business Ethics, 138(3), 525-533.

3. [3]	Jiang, T.T., Zhang, Y.L., and Jin, Q. (2021), Sustainability efficiency assessment of listed companies in China: a super-efficiency SBM-DEA model considering undesirable output, Environmental Science and Pollution Research, 28(34), 47588-47604.

4. [4]	Hoffmann, V.H. and Busch, T. (2008), Corporate carbon performance indicators: carbon intensity, dependency, exposure and risk, Journal of Industrial Ecology, 12(4), 505-520.

5. [5]	Ehlers, T., Packer, F., and Greiff, K.D. (2022), The pricing of carbon risk in syndicated loans: which risks are priced and why? Journal of Banking and Finance, 136(3), 106180.

6. [6]	Jaffe, A.B. and Stavins, R.N. (1995), Dynamic incentives of environmental regulations: the effects of alternative policy instruments on technology diffusion, Journal of Environmental Economics and Management, 29(3), S43-S63.

7. [7]	Porter, M.E. and Linde, C.V.D. (1995), Toward a new conception of the environment-competitiveness relationship, The Journal of Economic Perspectives, 9(4), 97-118.

8. [8]	Dasgupta, R. (2022), Financial performance shortfall, ESG controversies, and ESG rating: evidence from firms around the world, Finance Research Letters, 46(10), 102487.

9. [9]	Borenstein, S., Bushnell, J., Wolak, F.A., and Zaragoza-Watkins, M. (2019), Expecting the unexpected: emissions uncertainty and environmental market design, American Economic Review, 109(11), 3953-3977.

10. [10]	Gallego-Álvarez, I., Segura, L., and Martínez-Ferrero, J. (2015), Carbon emission reduction: the impact on the financial and operational performance of international companies, Journal of Cleaner Production, 103(1), 149-159.

11. [11]	Zhou, Z.F., Zhang, L.Y., Lin, L., Zeng, H.X., and Chen, X.H. (2020), Carbon risk management and corporate competitive advantages: `Differential Promotion' or `Cost Hindrance'? Business Strategy and the Environment, 29(4), 1764-1784.

12. [12]	Nguyen, J.H. (2018), Carbon risk and firm performance: evidence from a quasi-natural experiment, Australian Journal of Management, 43(1), 65-90.

13. [13]	Misani, N. and Pogutz, S. (2015), Unraveling the effects of environmental outcomes and processes on financial performance: a non-linear approach, Ecological Economics, 109(1), 150-160.

14. [14]	Nguyen, J.H. and Phan, H.V. (2020), Carbon risk and corporate capital structure, Journal of Corporate Finance, 64.

15. [15]	Xie, X.M., Huo, J.G., and Zou, H.L. (2019), Green process innovation, green product innovation and corporate financial performance: a content analysis method, Journal of Business Research, 101(4), 697-706.

16. [16]	Cui, J.B., Dai, J., Wang, Z.X., and Zhao, X.D. (2022), Does environmental regulation induce green innovation? A panel study of Chinese listed firms, Technological Forecasting and Social Change, 176.

17. [17]	Bertrand, M. and Mullainathan, S. (2003), Enjoying the quiet life? Corporate governance and managerial preferences, Journal of Political Economy, 111(5), 1043-1075.

18. [18]	Lin, Y.J., Fu, X.Q., and Fu, X.L. (2021), Varieties in state capitalism and corporate innovation: evidence from an emerging economy, Journal of Corporate Finance, 67.

19. [19]	Cheng, B., Qiu, B.Y., Chan, K.C., and Zhang, H.X. (2022), Does a green tax impact a heavy polluting firm's green investment? Applied Economics, 54(2), 189-205.

20. [20]	Bolton, P. and Kacperczyk, M. (2021), Do investors care about carbon risk? Journal of Financial Economics, 142(3), 517-549.

21. [21]	Li, W.J. and Zhang, R. (2010), Corporate social responsibility, ownership structure, and political interference: evidence from China, Journal of Business Ethics, 96(4), 631-645.

22. [22]	Fang, L. and Peress, J. (2009), Media coverage and the cross-section of stock returns, The Journal of Finance, 64(5), 2023-2052.

23. [23]	Bednar, M.K. (2012), Watchdog or lapdog? A behavioral view of the media as a corporate governance mechanism, Academy of Management Journal, 55(1), 131-150.

24. [24]	Buchanan, B., Cao, C.X., and Chen, C.Y. (2018), Corporate social responsibility, firm value, and influential institutional ownership, Journal of Corporate Finance, 52(10), 73-95.

25. [25]	Isidro, H.O. and Marques, A. (2021), Industry competition and non-GAAP disclosures, Accounting and Business Research, 51(3), 1-29.