Climate risk perception, performance feedback and corporate environmental responsibility

We examine how managers perceive climate risk and shift their attention, thereby influencing corporate environmental responsibility (CER). Using annual reports, we construct the climate risk perceived by 2650 Chinese listed companies from 2010 to 2020. We find that CER first increases and then decreases after a turning point in climate risk perception (CRP), represented by an inverted U-shaped association. This curvilinear association is mainly driven by climate transition risk perception. In contrast, we do not find a consistent or robust association between climate physical risk perception and CER. Furthermore, positive performance feedback is found to weaken the inverted U-shaped association between CRP and CER. Further analysis shows the impact of CRP on the components of CER and the heterogenous effect under different institutional pressures. The results have important implications for managing climate risk by companies and government.