Weather Shocks and Firm Performance: Who Bears the Brunt?

This study examines the relationship between extreme weather exposure and firm performance and whether it differs across development contexts. Using data on 20,518 firms in 102 countries from the 2022–2025 World Bank Enterprise Survey, we exploit a unique firm‐level measure of physical asset damage caused by storms, floods, droughts, landslides and heatwaves. The results show that extreme weather exposure is associated with lower capacity utilisation and annual sales through declines in labour productivity and total factor productivity. At the intensive margin, we find that greater damages are consistently associated with lower sales and labour productivity but not capacity utilisation. Heterogeneity analysis indicates that extreme weather is associated with greater sales losses among firms in middle‐income economies, larger capacity utilisation losses among those in high‐income countries and greatest labour productivity losses in low‐income countries, highlighting heterogeneous climate vulnerabilities across stages of development.