Extreme Heat, Supply Chain Risks and Enterprise Performance

This paper examines the impact of high temperatures on the downstream enterprises. By constructing “supplier-customer” pairs during 2001-2022, we explore exogenous variation in temperature and find that high temperatures in suppliers' regions significantly reduce customers’ performance. The effects are more pronounced for non-state-owned, smaller, less digitalized, more supply-chain-concentrated, and less monopolistic enterprises. The possible channel is that suppliers pass on the increased costs due to high temperatures to customers, leading to adverse impacts on their performance. This paper enriches the research on extreme weather and provides insights about how to respond to supply chain risks in a warming world.