How Firms Adapt to Rising Temperatures: Evidence from U.S. Establishments

Using detailed information on millions of establishments owned by U.S. public firms from 1990 to 2012, we show that long-lasting rising temperatures incentivize local public firms to reorganize their operation network by cutting local employment and shutting down local establishments exposed to rising temperature. In addition, firms’ operational adjustments to rising temperatures are closely related to managerial attention to and belief in climate change, as well as ownership by environmentally conscious mutual funds. Further analyses reveal that firms’ adaptation behavior is mainly driven by the negative long-run effect of rising temperatures on local consumer demand. Overall, we provide large-sample evidence on firms’ operational adjustments in response to rising temperatures.

Keywords: climate change, global warming, firm adaptation, consumer demand, managerial attention

JEL Classification: G40, G41, Q54

Suggested Citation: Suggested Citation

JIN, Zuben and Li, Frank Weikai and Lin, Yupeng and Zhang, Zilong, How Firms Adapt to Rising Temperatures: Evidence from U.S. Establishments (August 20, 2021). Available at SSRN: https://ssrn.com/abstract=3573260 or http://dx.doi.org/10.2139/ssrn.3573260