Physical Climate Change Risk and Corporate Cost Stickiness: Evidence From China

ABSTRACT We examine the relationship between physical climate change risk and corporate cost stickiness. Our findings indicate that physical climate change risk significantly reduces corporate cost stickiness. Mechanism analysis reveals that physical climate change risk reduces corporate cost stickiness by influencing managers' assessment of adjustment costs, moderating their optimistic expectations, and reinforcing their short‐term profit‐keeping agency motivations. Further analysis suggests that the impact of physical climate change risk on cost stickiness is more pronounced in firms with low climate risk diversification capabilities, high financial leverage, and those operating in non‐service industries.