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369In recent years, global climate change has exhibited a clear trend of acceleration, generating an increasingly far-reaching impact on the economic system and social development. As fundamental microeconomic actors, firms are inevitably exposed to these changes. More importantly, with the deepening specialization and interdependence embedded in modern supply chain networks, firms are tightly connected through complex upstream and downstream relationships. This amplifies the channels through which risks are transmitted, making physical climate risk faced by upstream suppliers a source of vulnerability for downstream client firms. However, there remains a notable gap in understanding whether and how supplier climate risk is priced in the capital market as a new factor. Given that the debt market is generally considered more sensitive to downside risks and information asymmetry, and climate risk may exacerbate these two issues, it is particularly important to explore the cross-firm spillover effect of supplier climate risk from the perspective of the debt market.
This paper conducts an empirical analysis based on a sample of China’s A-share listed companies. The findings provide robust evidence of a significant positive relationship between supplier climate risk and corporate debt financing costs, and digital procurement plays a mitigating role. Mechanism testing indicates that supplier climate risk exacerbates operating risks, increases information asymmetry, and affects corporate image, ultimately raising debt financing costs. Heterogeneity analysis suggests that the impact of supplier climate risk is more pronounced for firms with concentrated supplier geographical distribution, lower market position, dispersed ownership structure, and lower ESG ratings. Further research demonstrates that supplier climate risk leads to a more concentrated debt structure and a greater reliance on bank financing.
The contributions of this paper are as follows: First, by providing additional empirical evidence on the cross-firm spillover effect within supply chain networks, it enriches the literature on the economic consequences of climate risk, extending the scope of climate finance research beyond firm-level direct exposure. Second, by incorporating supply chain linkages into the analysis of corporate financing characteristics, it advances our understanding of how upstream climate risk is transmitted and priced in the debt market, offering a novel perspective on the determinants of corporate debt financing costs. Third, it suggests that firms should integrate climate risk assessment into supplier selection and supply chain management processes, alongside traditional criteria such as quality, costs, and technological capabilities, to enhance supply chain resilience and security.
