Climate policy uncertainty and corporate supply chain stability

Frequent changes of climate policies are bound to have a significant impact on supply chain relationships. This paper empirically examines the impact of climate policy uncertainty on corporate supply chain stability, using a sample of 4174 observations from Chinese A-share listed companies, from 2007 to 2023. The results indicate that increased climate policy uncertainty decreases corporate supply chain stability. This effect is more pronounced for high-carbon enterprises and those facing strong industry competitions. The mechanism analysis reveals that climate policy uncertainty increases corporate cash flow volatility and reduces total factor productivity, consequently undermining the stability of corporate supply chain. Corporate digital transformation and risk-taking alleviate the negative impact of climate policy uncertainty on supply chain relationship stability. However, managerial myopia aggravates this impact. The findings provide empirical evidence about how to effectively prevent risks upstream and downstream in the supply chain in the face of climate policy uncertainty.