Climate Risk, Soft Information, and Credit Supply

à lvarez-Román, Laura, Sergio Mayordomo, Carles Vergara-Alert and Xavier Vives

No 18661, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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. In contrast, local banks (geographically concentrated), due to their access to soft information, 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.

JEL-codes: G21 G32 Q54 (search for similar items in EconPapers)
Date: 2023-12
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