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Climate Change and Adaptation in Global Supply-Chain Networks

Author

Listed:
  • Nora M C Pankratz
  • Christoph M Schiller

Abstract

This paper examines how physical climate exposure affects firm performance and global supply chains. We document that heat at supplier locations reduces the operating income of suppliers and their customers. Further, customers respond to perceived changes in suppliers’ exposure: when suppliers’ realized exposure exceeds ex ante expectations, customers are 7% more likely to terminate supplier relationships. Consistent with experience-based learning, this effect increases with signal strength and repetition and decreases with country-level climate adaptation. Subsequent replacement suppliers show a lower expected and realized but similar projected heat exposure. We find similar results for suppliers’ exposure to floods.

Suggested Citation

  • Nora M C Pankratz & Christoph M Schiller, 2024. "Climate Change and Adaptation in Global Supply-Chain Networks," The Review of Financial Studies, Society for Financial Studies, vol. 37(6), pages 1729-1777.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:6:p:1729-1777.
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    More about this item

    Keywords

    G15; Q54; G30; F64;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment

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