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AbstractResearch Question/IssueThis study aims to investigate the role of foreign institutional investors (FIIs) on corporate risk‐taking in an international context. We conjecture that FIIs play a role in encouraging firms to take risks and can substitute country‐level corporate governance in determining corporate risk‐taking.Research Findings/InsightsEmploying a large sample of 17,698 firms across 42 economies, we show that foreign institutional ownership positively influences corporate risk‐taking. This positive relation is achieved through the monitoring channel and the insurance channel. Furthermore, we show that FIIs substitute country‐level corporate governance in determining corporate risk‐taking, indicating that FIIs play a significant role in promoting risk‐taking in economies with weaker governance. In addition, debtholders view FIIs' risk‐promoting role negatively and use more restrictive covenants to protect themselves.Theoretical/Academic ImplicationsThis study provides empirical support for the role of FIIs on corporate investment decisions, thus complementing the existing literature. In addition, our paper documents that country‐level corporate governance and FIIs are substitutes in determining corporate risk‐taking, thus shedding additional light not only on the role of country‐level corporate governance but also on its controversial joint role with FIIs.Practitioner/Policy ImplicationsFIIs from economies with stronger corporate governance are particularly effective at promoting corporate risk‐taking in economies with weaker corporate governance, providing a new channel through which foreign investments can influence economic growth in developing economies. Therefore, policymakers should carefully consider and trade off the costs and benefits of foreign investment when proposing relevant policies.

AbstractResearch Question/IssueThis study investigates the relationship between climate risk and corporate tax avoidance. Previous studies on this relationship generate mixed results, theoretically and empirically. Our study addresses this empirical question by providing new evidence using a large international sample and a novel proxy for climate risk.Research Findings/InsightsThe empirical results show that higher climate risk is associated with higher tax avoidance. Mechanism analyses show that this positive association is due to the incentive to reserve cash in response to tightened financial constraints, rather than tax deductions granted by governments. This result is more pronounced in countries or regions that have poorer corporate governance and information environments, lower economic development, and a more uncertain policy environment.Theoretical/Academic ImplicationsOur evidence highlights the importance of considering the role of climate risk in corporate tax policies and of comparing the link between climate risk and tax avoidance across countries.Practitioner/Policy ImplicationsEchoing environmental non‐governmental organizations' (NGOs) recent call on governments to strengthen tax administration, our study has policy implications that emphasize the necessity for policymakers to consider the link between climate risk and tax avoidance.