CARBON RISK AND CORPORATE FINANCIAL STABILITY: EVIDENCE FROM AN EMERGING MARKET
DOI:
https://doi.org/10.18623/rvd.v23.4993Palavras-chave:
Carbon Risk, Financial Stability, Sustainable Finance, Corporate Governance, Emerging Markets, Indonesia, Climate PolicyResumo
This study examines how carbon transition risk affects corporate financial stability in Indonesia, using a multi-theoretical lens grounded in Stakeholder, Agency, and Legitimacy theories. Indonesia provides a distinctive setting where many corporate strategies lag behind emerging national policies, yet firms face increasingly stringent expectations from global markets. Using 932 firm-year observations from non-financial listed companies (2021–2024), the study applies panel data regression to test the link between carbon exposure and financial stability. The results show a significant negative relationship: high-emitting firms experience a “legitimacy gap” and are penalized by financial stakeholders. Consistent with transition risk mechanisms, investors and lenders appear to treat emissions as a proxy for future liabilities, effectively importing global carbon-pricing pressure before domestic regulations are fully enforced. From an Agency Theory perspective, this indicates a governance failure—management’s inability to align short-term operations with long-term decarbonization—creating strategic vulnerabilities that weaken solvency. The study contributes by confirming that carbon exposure is a material financial risk in an emerging economy, driven by the mismatch between corporate readiness and global transition demands. It also frames decarbonization as a board-level priority to preserve capital access and supports mandatory climate disclosures to standardize risk assessment.
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