Does carbon emission of firms aggravate the risk of financial distress? Evidence from China

Using dataset from 2008 to 2018 in China, this paper explores the influences of corporate carbon emission behaviors on financial distress. The result shows that the more carbon emissions are the higher risks of financial distress. After the robustness tests such as adding omitted variables, instrumental variable analysis and excluding special areas, results are still robust. The heterogeneity test indicates that the effect of corporate carbon emission behaviors aggravating the risk of financial distress is more obvious in enterprises with lower operating ability and weaker credit financing ability.