Feeling the heat: The impact of temperature anomalies on corporate investment in China

This study investigates how climate-driven temperature anomalies affect corporate investment in China, extending research on climate impacts in corporate finance. Prior studies show high temperatures negatively impact economic output and firm performance in emerging economies, yet corporate investment responses remain underexplored. Using data from Chinese publicly listed firms from 2001 to 2019, we employ multivariate regression to examine the effects of temperature anomalies on investment. Our findings reveal that a 1 °C increase in temperature anomalies reduces corporate investment by 9.25 %, a result consistent across models, primarily driven by heightened uncertainty and rising production and financing costs. Moreover, accounting for geographic and economic factors, we find limited evidence of effective adaptation strategies among Chinese firms. These findings enhance understanding of climate-related economic vulnerabilities at the firm level and underscore the urgency of adaptive corporate strategies in emerging markets.