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The impact of extreme temperature on firm entry: Evidence from Guangdong

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  • Zhang, Jie
  • Zhang, Xin

Abstract

The frequent occurrence of extreme temperature events under the background of global climate change may have a far-reaching effect on the vitality of enterprise entry. This study uses the registration information of enterprises in Guangdong Province, China from 2000 to 2020 to explore the relationship between industrial activities and extreme temperatures through a high-dimensional fixed effects model. Results show that for each day of increase in extreme temperature, the entry degree of enterprises decreases by 0.007 points, which is equivalent to 0.7937 % of the mean level. The effect of extreme temperatures on the entry of enterprises is mostly concentrated in municipal areas, the Greater Bay Area, and areas with high power consumption and housing prices. In particular, this effect is more pronounced after the implementation of high-temperature subsidies. In the mechanism analysis, we explore and demonstrate the potential effect channels from the perspectives of enterprise cost, investment, and adaptability. This study contributes to regional economic development by enhancing adaptation to climate risks. It aids in formulating and adjusting climate policies in vulnerable regions, alleviating local environmental inequalities.

Suggested Citation

  • Zhang, Jie & Zhang, Xin, 2026. "The impact of extreme temperature on firm entry: Evidence from Guangdong," Research in International Business and Finance, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:riibaf:v:84:y:2026:i:c:s0275531926000413
    DOI: 10.1016/j.ribaf.2026.103314
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    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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