The impact of climate risk perception on corporate carbon emissions: textual analysis of Chinese listed firms

This study examines the association between corporate climate risk perception, as reflected in the textual content of annual reports, and carbon emissions among Chinese A-share listed firms from 2010 to 2023. Employing textual analysis to construct a firm-level climate risk perception index from Management Discussion and Analysis (MDA) sections of 31,238 firm-year observations, and using panel regression models with firm, industry, and year fixed effects as well as instrumental variable and propensity score matching approaches, we find a significant positive association between the intensity of climate risk disclosure and firms’ carbon emissions, consistent with the constraint-signaling view that narrative emphasis on climate risks reflects operational and financial barriers to decarbonization rather than environmental commitment. Mechanism analysis suggests that this association operates through two distinct channels: tightened financing constraints, which limit green investment capacity, and elevated agency costs, which divert resources from substantive emission reduction efforts, with the mediation proportion for agency costs (37.7%) substantially larger than that for financing constraints (4.4%), indicating that internal organizational inefficiencies play a more prominent role as a transmission mechanism. Heterogeneity tests further reveal that the positive association is more pronounced in low-regulation regions and non-state-owned enterprises, while stringent environmental regulation is associated with a weaker relationship. Our findings contribute to the literature on environmental disclosure and corporate sustainability by demonstrating that voluntary climate risk narratives may reflect structural constraints in emerging economies, with implications for policymakers designing climate disclosure frameworks and for investors interpreting corporate sustainability signals.