Gone With the Wind? Impacts of Typhoons on Firm Sales and Productivity

ABSTRACT

Tropical cyclones impose large and rising costs on the economy, yet firm‐level evidence on typhoons in China is still scarce. Combining meteorological data with financial data for Chinese listed firms, we estimate the causal effect of typhoon shocks on firm sales and productivity. We find that typhoon exposures cause an immediate and lasting fall in sales. The effect on productivity is delayed for ordinary typhoons but immediate for severe ones. A decomposition shows that the productivity drop is driven by short‐run adjustment costs rather than a permanent technological decline. Typhoons damage firms by disrupting supply chains, tightening financial constraints, and shrinking the workforce. Holding more inventory and cash reduces the damage; firms with stronger ESG performance suffer smaller losses, and firms recover more fully where local governments play a larger role. Interpreting these patterns through resource dependence, organizational resilience, and dynamic capabilities theory, we show that firm resilience to extreme weather rests on both private adaptive capabilities and public institutional capacity, which together support sustainable development.