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Recognizing how climate-induced disasters influence firm performance is crucial for managers to build corporate resilience against climate risks. Using the panel data of 2, 112 China’s listed firms from 2007 to 2022 and treating climate-induced natural disasters as a quasi-natural experiment, this article empirically examines the impact of natural disasters on firm performance and explores potential mechanisms through a multi-period difference-in-differences (DID) model. Our findings indicate that climate-induced disasters significantly undermine firm performance. Mechanism analysis further reveals that climate-induced disasters adversely affect firms’ cash holdings and production by restricting financing capabilities and disrupting supply chains, thereby deteriorating their financial performance. Consistent with dynamic capability theory, our results confirm the crucial role of asset liquidity and digital transformation in shaping the resilience of firm performance to natural disasters. Heterogeneity analysis further reveals that the impact of climate-induced disasters is more pronounced for non-manufacturing firms, private firms, and low-tech firms. Additionally, firms located in poorer regions and high-temperature areas exhibit much greater sensitivity to natural disasters. Our findings contribute to enhancing firms’ awareness of disasters prevention and strengthening their management strategies, providing valuable insights for promoting corporate sustainable development.
Hu et al. (Wed,) studied this question.