Abstract Frequent and long-lasting extreme climate events can impact business-related natural capital, severely affecting production and resulting in losses for agricultural firms. Physical climate effects are material dependencies for agricultural businesses and may severely affect their performance and compromise their survival. This study’s aim is to analyze the comprehensive effect of climate change factors on agricultural firm bankruptcies in a European geographical area that is especially susceptible to climate change. Employing a panel of 15 036 agricultural firms, we analyze the effects of adverse climatic conditions in the firm’s headquarters area using logit regressions, an instrumental variable ordinary least squares model, and the gradient-boosting ensemble method. We find that bankruptcy is conditioned upon extreme weather events, indicating that climate change’s physical impacts on firm resources already materially affect the agricultural sector’s resilience and survival. Specifically, abnormally high temperatures, precipitation, and the incidence of fires are significant factors that contribute to bankruptcy or insolvency. Furthermore, a “fire weather” index comprising high temperatures, drought, and wind, combined with fire occurrence, intensifies the bankruptcy risk of agricultural businesses.
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