The impact of climate change risks on firm entry: empirical evidence from Chinese enterprise registration data

Xiaohong Huang, Jinyue Zhao and Xiaoqi Huang

Journal of Economic Studies, 2025, vol. 53, issue 5, 995-1011

Abstract: PurposeExtreme weather anomalies and their economic and social impacts have garnered significant attention, making it vital to examine how climate change affects firm entry.Design/methodology/approachThis study calculates a regional climate physical risk index using temperature and precipitation data from 188 cities in China, spanning 2005 to 2022. Various models are employed to analyze the relationship between climate change and firm entry.FindingsThe findings reveal that climate change notably suppresses firm entry in local markets through two main channels: firm-level mechanisms (financial constraints, business risk and ESG scores) and macro-level factors (human capital, resource misallocation and market distortion). This suppressive effect varies by region and industry, being especially pronounced in peripheral cities with frequent natural disasters and severe pollution, while remaining insignificant in central cities. The impact extends across most sectors, including agriculture and manufacturing, but not the financial sector.Originality/valueThese insights enhance our understanding of climate change’s influence on corporate entry strategies.

Keywords: Climate change; Extreme weather; Firm entry; Human capital; Business risk; ESG (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-11-2024-0736

DOI: 10.1108/JES-11-2024-0736

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