Climate risk, soft information and credit supply

Laura Álvarez-Román, Sergio Mayordomo, Carles Vergara-Alert and Xavier Vives
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Laura Álvarez-Román: Banco de España
Sergio Mayordomo: Banco de España
Carles Vergara-Alert: IESE Business School
Xavier Vives: IESE Business School

No 2406, Working Papers from Banco de España

Abstract: We study a model of the impact of climate risk on credit supply and test its predictions using data on all wildfires and corporate loans in Spain. Our findings reveal a significant decrease in credit following climate-driven events. This result is driven by outsider banks (large and diversified), which reduce lending significantly to firms in affected areas. By contrast, due to their access to soft information, local banks (geographically concentrated) reduce their loans to opaque affected firms to a lesser extent without increasing their risk. We also find that employment decreases in affected areas where local banks are not present.

Keywords: wildfire; asymmetric information; bank heterogeneity; firm lending. (search for similar items in EconPapers)
JEL-codes: G21 G32 Q54 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2024-02
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2406

DOI: 10.53479/36112

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