Flooded Through the Back Door: Firm-Level Effects of Banks' Lending Shifts

Oliver Rehbein ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: I show that natural disasters transmit to firms in non-disaster areas via their banks. This spillover of non-financial shocks through the banking system is stronger for banks with less regulatory capital. Firms connected to a disaster-exposed bank with below median capital, reduce their employment by 11\% and their fixed assets by 20\% compared to firms in the same region without such a bank during the 2013 flooding in Germany. Low bank capital thus carries a negative externality because it amplifies regional shock spillovers. I show that bank liquidity, and firm capital and liquidity are less relevant to prevent shock transmission.

Keywords: natural disaster; real effects; shock transmission; bank capital (search for similar items in EconPapers)
JEL-codes: E24 E44 G21 G29 (search for similar items in EconPapers)
Pages: 70
Date: 2018-09
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2018_043v1

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