Despite the growing integration of artificial intelligence (AI) into business models, studies of its impact on corporate climate change exposure remain scarce. Through an examination of AI-related innovations among US-listed firms from 2001 to 2019, we present compelling evidence that AI innovation effectively mitigates firms’ climate change exposure. In particular, it reduces firms’ exposure to regulatory and physical risks related to climate change through improved carbon management efficiency, with computer vision and control and planning being the most effective types in this context. Our findings are particularly pronounced for mature firms and those facing greater regulatory intervention. The results withstand rigorous tests that address endogeneity concerns. Our study provides strong support for firms to adopt AI innovations to achieve carbon neutrality, contributing to the ongoing discourse regarding AI trade-offs. Our findings also offer valuable insights into the development of climate risk mitigation strategies.

By exploiting the staggered city-level establishment of specialized environmental courts in China as exogenous shocks and using a difference-in-differences research design, we find that an increase in the efficiency of environmental enforcement leads to a decrease in companies’ access to bank loans. The channel tests show that these same shocks lead to an increase in environmental litigation, operational and reputational risk. The cross-sectional analyses also reveal consistent evidence. Collectively, our findings suggest that the environmental mandate has important externalities for bank lending decisions, indicating that the costs of environmental enforcement go beyond reducing environmental pollution.

Using a large international sample of firms, we examine the relation between carbon management ability (CMA) and firm-level climate risk exposure. We find that CMA is negatively associated with climate risk exposure. More importantly, we show that firms with high-CMA managers tend to achieve a reduction in climate risk exposure through enhancing regulatory compliance (evidenced by fewer stakeholder rights violations), reducing environmental, social, and governance-related controversies, investing in research and development, undertaking more investment in environmental initiatives, and cultivating a favorable corporate culture. Cross-sectional analyses indicate that the negative association between CMA and climate risk exposure is stronger for firms in carbon-intensive sectors and firms with a dedicated corporate sustainability committee. Further, we reveal that CMA exerts a greater influence on climate risk exposure in stakeholder-oriented countries and in countries that have signed the Paris Agreement. Finally, we reveal that firms with high-CMA managers tend to have better financial performance. Overall, our findings indicate that CMA plays a crucial role in driving firms towards more sustainable and responsible business practices, leading to better corporate performance and enhanced corporate reputation.

This study examines the relation between share pledging by controlling shareholders and optimism in analyst earnings forecasts. Using a sample of listed Chinese firms from 2007 to 2018, we find that analysts make more optimistic forecasts for firms whose controlling shareholders have pledged their shares for bank loans and whose share pledge ratio is high. This relation is stronger for firms with poor prior stock performance, for firms located in regions with a high level of marketization, and for analysts who have close connections with firms, but is weaker for reputable analysts and those from larger broker firms. In addition, analyst optimism becomes weaker when the share-pledging loan approaches the end of the term and when the analyst forecast date is closer to the earnings announcement, and becomes more pronounced when analysts make forecasts over a longer horizon. The results suggest that in cases of share pledging, the threat of losing controlling rights creates significant incentives for controlling shareholders to collude with analysts.