Lin Zhang
An Energy & Sustainability Economist
Climate and Sustainable Finance
My new research interest focuses on climate and sustainable finance. As climate change has become an increasingly pressing challenge for the economy, the community, and the business world, a clear understanding of how climate change and its associated risks affect our daily life is particularly critical for the transition towards a low-carbon economy. To this end, I explore the interactions among climate systems, business strategies, and economic dynamics.
Internal carbon pricing (ICP) has emerged as an increasingly popular tool for firms to cut emissions and combat climate change risks. We theorize the role of ICP by integrating legitimacy and stakeholder perspectives into dynamic capability theory. We argue that firms implement ICP to comply with stakeholders’ expectations, leading to corporate environmental strategic transformation which in turn improve a firm's dynamic capabilities. Collectively, we advance understanding of corporate business strategy in the presence of climate change risks, posing both theoretical and practical policy implications.
Climate change entails potential risks for investors, and its effects on investment has spread beyond physical borders. This study investigates how multinational corporations (MNCs) incorporate climate risks into their decisions regarding foreign direct investments (FDIs). We find that large differences in the climate risks of home and host cities discourages FDI by increasing cross-border adaptation costs. This study provides new evidence on the profound effects of climate risks on FDI and how smart cities can increase their resilience to climate risks in the context of international business.
A critical strategy choice for a corporate governance is how to disclose corporate performance to satisfy its key stakeholders. Using data from 2009 to 2016 on the environmental information disclosure (EID), we document consistent evidence that if the government is a customer of the firm, the firm has higher corporate EID scores, which indicates a firm is motivated to disclose a higher level of corporate environmental responsibility (CER). Firms tend to disclose higher levels of CER efforts to accommodate their influential government customer’s environmental concerns.
Ongoing Research Projects
【Ongoing】Futureproofing Against Climate Regulatory Risk: Innovation or Relocation?
How do multinational enterprises (MNEs) cope with the increasing stringency of carbon policy? We explore two strategies—relocation through outward direct investment (ODI) and innovation of green technology. We employ a staggered difference-in-differences approach that compares the ODI and green innovation behavior of MNEs regulated by China’s pilot emissions trading systems (ETS) to the unregulated ones. We find no evidence of investment leakage to the rest of the world: MNEs do not change ODI in response to the ETS. This result remains robust when we focus on MNEs in dirty industries and host countries with lax climate policies. However, we find significant evidence that MNEs, especially those with a strong innovative culture and experiencing regulatory pressures, filed more green patent applications after the ETS implementation. Our finding that MNEs engage in green innovation instead of production relocation in response to climate regulation points to a regime shift in climate coping strategies.
【Ongoing】From green to greener
We investigate the causal effect of corporate green bond on green innovation. This effect is more pronounced in areas with fewer climate risks and weaker climate regulation, industries with better environmental performance, and firms with more concentrated ownership. Further analysis suggests that corporate green bonds encourage firms to reallocate financial resources into research and development activities, which alleviates the financial dilemma of green innovation. The promotion of green innovation also improves financial performance while yielding environmental benefits. Collectively, our empirical findings provide new insights into the necessity of green finance on corporate green innovation and climate governance.
【Ongoing】How does the climate-responsible CEO affect corporate carbon performance?
Corporations are increasingly concerned about the performance impacts of climate change. This paper combines upper echelons theory with attention-based view to explore how corporate carbon performance is affected by the chief executive officer (CEO) when s/he acts as climate responsible. By utilizing a sample of 501 U.S. listed corporations reported by the Carbon Disclosure Project during 2010-2019, we find that the climate-responsible CEO (CRC) increases corporate carbon performance. Such positive impacts are stronger for corporations in moderate carbon-intensive industries than in the low or high carbon-intensive industries. Furthermore, when the CRC is a board member or a chairman of the board, high discretion instead weakens this positive effect. We also find that technological innovation and green innovation are effective channels for CRC to improve corporate carbon performance. Thus, this paper contributes to promoting corporate carbon performance management.
【Ongoing】Collective governance, team diversity and corporate environmental performance
This paper examines whether collective governance leads to better corporate social responsibility (CSR) performance in the presence of team diversity and environment regulation. With the sample of 716 U.S. companies reported by the Carbon Disclosure Project during 2009-2018, we find that the tenure of collective governance team and firm CSR performance is an inverted U-shaped nonlinear relationship. Short team tenure of collective governance hardly improves firm’s CSR performance. Furthermore, we find that team diversity and environmental regulation moderate the relationship between team tenure and firm’s CSR performance. Diversity and environmental regulation weaken the adverse effects of team governance at the early stage and promote the positive effects at the later stage of governance. Collective governance promotes firm’s CSR performance by increasing the investment budget for emission reduction activities. Overall, our results suggest that collective governance can improve firm’s CSR performance effectively.