Firms’ Management of Infrequent Shocks

Benjamin Collier, Andrew F. Haughwout, Howard C. Kunreuther and Erwann O. Michel‐kerjan

Journal of Money, Credit and Banking, 2020, vol. 52, issue 6, 1329-1359

Abstract: We examine businesses’ financial management of a rare, severe event using detailed firm‐level data collected following Hurricane Sandy in the New York area. Credit played a prominent role in financing recovery; more negatively affected firms took on debt because of Sandy (39%) than received insurance payments (15%) in our data. Negatively affected firms were frequently credit constrained after the shock. We also find that the most credit‐constrained firms after the event, younger firms, and smaller firms, were the least likely to insure before it. Our findings align with the predictions of dynamic risk management theory (Rampini and Viswanathan 2010, 2013).

Date: 2020
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https://doi.org/10.1111/jmcb.12674

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Working Paper: Firms’ Management of Infrequent Shocks (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:52:y:2020:i:6:p:1329-1359

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