After the Storm: How Emergency Liquidity Helps Businesses Following Natural Disasters

Benjamin L. Collier, Sabrina T. Howell and Lea Rendell

No 32326, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Severe climate events create financial distress for businesses. Can emergency credit help? We study the causal effects of government-provided business recovery loans. Our data include loan applications from over 167,000 firms representing 1,900 distinct disasters, which we merge with census records and business credit reports. We follow firms for seven years after experiencing a disaster across a rich set of real and financial outcomes. We find that recovery loans help firms survive, reducing exit and bankruptcy. They also increase employment. Our results suggest that in the disruptive aftermath of a natural disaster, businesses that need funds to recover often struggle to access credit from private lenders. Recovery loans crowd in private credit, which may reflect resolving private-lender uncertainty about repair feasibility.

JEL-codes: G21 G32 H81 Q54 R33 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-cfn, nep-env, nep-sbm and nep-ure
Note: CF EEE PE PR
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