Do bankers want their umbrellas back when it rains? Evidence from typhoons in China

Pauline Avril (), Grégory Levieuge and Camelia Romocea Turcu
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Pauline Avril: University of Orleans

No 2023.08, Working Papers from International Network for Economic Research - INFER

Abstract: A cataclysmic event might lead to a decrease in lending, while banks would be expected to help with recovery. This study investigates which effect dominates. In particular, our paper explores how typhoons affect the lending activities of Chinese banks. It relies on the exposure of more than 161,000 bank branches held by 327 Chinese banks over the period from 2004 to 2019. Our difference-in-difference estimates reveal that, on average, typhoons trigger a decrease in lending that accounts for 2.8 percent of total bank assets. This decline comes from commercial banks. On the contrary, rural banks act as shock absorbers. This may be the consequence of long-term lending relationships and banks’ better knowledge of local economic and physical risks. The absence of rural banks is even found to be detrimental to local post-typhoon growth. Last, government ownership and external political pressure mitigate the relative decline in lending by typhoon-hit commercial banks.

Keywords: Typhoons; lending; banking system; China; shock absorbers; shock transmitters (search for similar items in EconPapers)
JEL-codes: F (search for similar items in EconPapers)
Pages: 42 pages
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-cna and nep-fdg
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