Climate risk and corporate green transformation: nonlinear evidence from Chinese listed firms

Purpose This paper aims to examine the nonlinear relationship between climate risk and corporate green transformation and whether firms’ green transformation responses vary across different levels of climate risk. Design/methodology/approach Using panel data on Chinese A-share listed firms from 2010 to 2024, this study estimates two-way fixed-effects models to assess the nonlinear association between climate risk and corporate green transformation. This study further explores underlying mechanisms, moderating effects and heterogeneous responses. Findings Climate risk exhibits an inverted U-shaped association with corporate green transformation. At the sample mean, a one-standard-deviation increase in climate risk is associated with an increase in green transformation equal to 20.1% of its standard deviation. At 0.70, the marginal association turns negative, reaching 38.0% in magnitude. Supply chain uncertainty and market competition are more prominent at low risk, whereas patient-capital contraction and waiting-option incentives dominate at high risk. Digitalization delays the turning point, while financing constraints bring it forward. Responses are weaker in high-climate policy uncertainty regions and labor-intensive industries. Originality/value This paper extends the climate risk literature by revealing a nonlinear response in corporate green transformation. It further shows that under heightened climate pressure, firms’ symbolic green disclosure may continue to increase while substantive green transformation weakens, offering new evidence on the symbolic–substantive divergence of corporate environmental responses.