The impact of weather shocks on rural credit cooperatives

Chengtao Deng, Mengfu Han, Jun Luo and Junjie Zhang

Finance Research Letters, 2025, vol. 75, issue C

Abstract: This paper estimates the impact of weather shocks on the credit and insolvency risks of China’s rural credit cooperatives. We find that abnormal temperatures and heavy precipitation deteriorate loan quality. One more day with a temperature below 5 °C increases the non-performing loan ratio by 0.22 percentage points. One more day with a temperature above 30 °C causes a downward migration of the normal loan into the special-mention category by 0.17 percentage points. One more day with precipitation over 50 mm decreases the Z-score by 0.94%. We also find that the rural credit cooperatives heavily exposed to agriculture are particularly vulnerable.

Keywords: Climate change; Credit risk; Insolvency risk; Rural finance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001370

DOI: 10.1016/j.frl.2025.106872

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