Climate Risk Disclosure and Financial Stability: The Moderating Role of Environmental Regulation Intensity
Main article
Abstract
In recent years, climate risk disclosure (CRD) has emerged as a critical component of corporate transparency and financial resilience. This study investigates the relationship between climate risk disclosure and financial stability, emphasizing the moderating role of environmental regulation intensity. Drawing on a global panel dataset of publicly listed firms from 2010 to 2023, we employ a two-way fixed effects model to assess how the quality and extent of climate-related disclosures influence firms’ financial soundness, measured by indicators such as Z-score and cash flow volatility. The empirical results reveal that enhanced climate risk disclosure significantly contributes to financial stability by reducing information asymmetry and improving risk management capacity. Moreover, environmental regulation intensity strengthens this positive relationship, suggesting that stringent regulatory environments not only encourage more comprehensive disclosure practices but also amplify their stabilizing effects on financial performance. The findings highlight the importance of integrating environmental governance mechanisms with corporate reporting frameworks to foster a more resilient and sustainable financial system. This study contributes to the literature on environmental finance by offering empirical evidence on how policy interventions and disclosure practices jointly shape financial stability in the era of climate uncertainty.
