Supply Chain Transmission of Hot Weather Shocks and Import-Based Adaptation: Evidence from Listed Companies in China
Description
We examine how supplier heat exposure drives downstream firms to import more. Using the disclosure of listed companies in China in 2010 to 2016 to connect supplier-customer pairs with upstream weather data and downstream customs trade data, this paper empirically examines the adaptation of customer firms under the hot weather shocks at the suppliers' sites. Hot weather at the supplier’s site leads to customers to raise imports significantly, and the relationship holds regardless of supplier-customer distances. This finding holds across various samples and alternative specifications. Customer firms with weak bargaining power or superior foreign market access show the most pronounced reactions. This further reinforces the adaptation hypothesis that hot-weather effects are strong enough to drive customers to shift input demand abroad.