<p>Using a global dataset, we document that an increase in country-level climate vulnerability, measured by exposure, sensitivity, and adaptive capacity to the negative effects of climate change, results in an increase in firm-level stock price crash risk. Among these components, adaptive capacity exhibits the most prominent and persistent explanatory power. We confirm our main findings using an instrumental variable approach and exploring two regulatory shocks that tend to generate worldwide or within-country variations in adaptive capacity. In addition, we show that greater climate vulnerability is associated with weaker firm fundamentals, more aggressive bad news hoarding, and narrower institutional ownership breadth, all of which tend to trigger future stock price crashes. Moreover, the main effect varies with institutional or cultural differences across countries. Our overall findings indicate that climate vulnerability has adverse stock market consequences through a pronounced destabilizing effect. These findings highlight the critical role of formal and informal institutions in mitigating and adapting to climate change, an important issue for business operations and policymakers worldwide. International investors and multinational corporations should closely monitor country-level policies and initiatives aimed at enhancing climate resilience when selecting investees and managing global supply chains.</p>