The impact of coal price shocks on the default risk of high energy-consuming firms in China

Abstract

High energy-consuming firms are vital in industrial and energy systems of China. Against the backdrop of energy transition, coal price shocks could be an important external disturbance that may challenge the operational continuity and risk management capacity of these firms. Using listed firm panel data sets covering six energy-intensive industries from 2007 to 2022, this study measures corporate expected default probability (EDP), and employs the SVAR method to decompose the sources of coal price shocks, examining their impact on corporate default risk and the mechanisms. The empirical results demonstrate that: (1) Coal price shocks significantly affect firms’ default risk. Among different shock types, supply-driven shocks show the strongest significance (coefficient = 0.0854, p < 0.01). Moreover, the impact demonstrates asymmetrical patterns between positive and negative shocks. (2) Mechanism analysis reveals that coal price shocks elevate default risk by increasing cost pressure and eroding firms’ profitability and long-term value. (3) The moderating role of financial constraints exhibits strong regional heterogeneity. (4) The effects of environmental regulations are also heterogeneous. Command-and-control regulations tend to exacerbate default risk under price shocks, whereas market-based regulation has not yet exhibited a significant moderating role. Overall, this study demonstrates that coal price shocks propagate through energy-intensive production systems and financial structures, ultimately manifesting as elevated corporate default risk. The findings provide insights into enterprise risk management and system-level coordination between energy markets and financial systems, offering managerial implications for enhancing the resilience of high energy-consuming firms during the energy transition.

Keywords

coal price shocks / risk management / corporate default risk / high energy-consuming firms / financial resilience

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Higher Education Press 2026

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