Air pollution and corporate risk-taking: Evidence from China

Using a sample of Chinese listed companies from 2014 to 2018, we investigate the effect of air pollution on corporate risk-taking. The findings show that air pollution is negatively related to corporate risk-taking in China. The mechanism analyses find that executive incentives and state ownership weaken the negative effect of air pollution on corporate risk-taking, suggesting that inducing negative mood to executives and increasing environmental regulations by local gov-ernments are two potential channels. Overall, our study provides evidence on how air pollution affects corporate policy in terms of risk-taking.