Drying Up: The Effect of Drought on Corporate Loans with AnaCredit Data

Jan Janku, Tomas Karhanek, Simona Malovana and Ivan Trubelik

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: This paper examines whether chronic physical climate risk affects corporate credit allocation. We focus on drought, one of the most salient climate-related risks for the Czech economy, and combine granular AnaCredit data with district-level measures of drought-related agricultural losses. Using almost 6 million bank-firm-month observations for nearly 140,000 firms between 2019 and 2023, we show that long-term drought exposure is associated with a significant contraction in new corporate lending. The effect is concentrated at the origination margin: newly originated credit declines by about 12 percent in drought-affected regions, while outstanding credit volumes adjust more gradually. The impact varies across bank-firm relationships, credit-exposure characteristics, and sectors, consistent with banks incorporating chronic physical climate risk primarily into new lending decisions rather than immediately reducing existing exposures.

Keywords: Bank lending; Climate risk; Corporate credit; Drought; Loan origination; AnaCredit (search for similar items in EconPapers)
JEL-codes: E51 G21 G32 Q54 (search for similar items in EconPapers)
Date: 2026-07
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2026/11

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