Understanding the Trembles of Nature: How Do Disaster Experiences Shape Bank Risk Taking?

J. Bos and Runliang Li
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Runliang Li: Finance, RS: GSBE EFME

No 33, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: This paper examines the impact of natural disaster experiences on banks’ business practices. Using earthquake and banking data for California, we find that banks that have had stronger earthquake experiences change their practices, both as a result of the natural disasters’ effects on local deposit supply and through changes in banks’ risk perceptions. These banks have a smaller exposure to real estate, maintain higher equity levels, and are more likely to lend to high-income borrowers. This paper confirms, therefore, that institutional memory exists in the banking sector and that banks and communities adapt to natural disasters interactively.

JEL-codes: D53 D83 G11 G21 Q54 (search for similar items in EconPapers)
Date: 2017-12-14
New Economics Papers: this item is included in nep-ban and nep-env
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2017033

DOI: 10.26481/umagsb.2017033

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