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The Paris Agreement signals increased climate awareness and potential changes in the business environment as an economy decarbonizes. Ratification of the Paris Agreement could heighten climate-related transition risks, especially for companies in high-emitting industries. This research analyzes the impact of Paris Agreement ratification on the debt financing decisions of publicly listed companies in Southeast Asian economies. Our empirical evidence shows that, after announcement of Paris Agreement ratification, firms in high-emitting industries have leverage and financial leverage that are an average of 1.8% and 4.2% lower, respectively, than firms in low-emitting industries. Firms in the region also witnessed higher risks 2 years after ratification, and these risks do not differ significantly between high- and low-emitting industries. This finding implies that firms become riskier under heightened transition risks, and this influences their financial decisions. Governments might thus consider introducing policies that facilitate their response to a low-carbon transition.

We examine the stock return implications of corporate-defined benefit pension plans in innovative U.S. firms and in R&D- and patent-sorted portfolio specifications. We find that investors underreact to firms increasing off-balance-sheet liabilities. Pensions represent material off-balance-sheet liabilities: in our extensive and large sample (1985–2017, 2541 firms for 26,522 observations), entities with pension plans are 38% more levered when we integrate pension liabilities and assets into the firms’ capital structure. We find that R&D-intensive firms increasing the size of their pension liability subsequently underperform their benchmark returns. Through six alternative R&D-market capitalization portfolios, we also find that this association is stronger for smaller firms. Finally, the relationship remains persistent over a long horizon. These findings are robust to endogeneity concerns addressed through instrumental variables, propensity score matching, and Heckman correction.

Beijing’s recent peace initiatives in the Middle East have drawn growing scrutiny and generated heated debate over its role in the Global South. Learning from the West’s hitherto mixed record in the regional peace process, China attempts to improve the effectiveness of regional peace diplomacy by focusing on three important ingredients, namely, neutrality, leverage, and timing. While Beijing’s neutrality stems from the long-held principle of inviolability of sovereignty and territorial integrity, its leverage draws from extensive and robust economic ties with regional stakeholders. Moreover, Beijing offers its good offices at a time when both the Iranians and Saudis have become conflict-weary, believing that continued tensions go against their own interests. Recent breakthroughs in peace diplomacy may raise local actors’ expectations to such levels that Beijing may find difficult to meet because China still defines its role as one of a facilitator, not a security guarantor.