Adapting to extreme heat: how corporate responses enhance customer stability

Purpose This paper examines the impact of extreme heat risk on corporate customer stability in the Chinese market. Design/methodology/approach Using a comprehensive dataset from 2012 to 2023, we find that greater exposure to city-level extreme heat risk incentive firms to adopt adaptive adjustments, thereby enhancing customer stability. Findings This effect is mainly achieved through three channels, including optimizing human capital, advancing digital transformation and strengthening supply chain finance. Cross-sectional heterogeneity test reveals that the impact is more pronounced in firms with lower labor intensity, fewer high-skilled employees and limited trade credit access. These findings provide novel evidence on how firms transform climate-related risks into opportunities to strengthen resilience, and offer important implications for corporate adaptation strategies and policy support in the context of global climate change. Originality/value Our research makes several contributions in three major aspects. First and foremost, our findings extend the literature on the economic consequences of extreme heat; furthermore, our research enriches the literature on the determinants of customer stability; last but not least, by examining the mechanism linking extreme heat risks at firm locations to customer stability, our study extends organizational adaptation theory to the context of climate risk and supply chains, enriching the theoretical framework on how climate factors influence corporate supply chain networks.