Hazardous Lending: The Impact of Natural Disasters on Banks'Asset Portfolio

J. Bos, Runliang Li and Mark Sanders
Additional contact information
Runliang Li: Finance, RS: GSBE EFME

No 21, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: This paper studies how banks adjust their asset structure in response to changes in loan demand after natural disasters. We show how banks help clients smoothen consumption and support local recovery through their asset diversification strategy. In the empirical part, using a difference-in-difference method, we find that U.S. commercial banks increase real estate lending after disasters and sell government bonds to finance such a disaster-driven demand surge. In the theoretical part of this paper we present a novel multiple-asset dynamic credit rationing model that explains these empirical findings. Using simulations of our model we can then predict and quantify the possible impact of climate change on the asset structure and profitability of banks for different scenarios.

JEL-codes: G21 Q54 (search for similar items in EconPapers)
Date: 2018-08-27
New Economics Papers: this item is included in nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://cris.maastrichtuniversity.nl/ws/files/27761388/RM18021.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2018021

DOI: 10.26481/umagsb.2018021

Access Statistics for this paper

More papers in Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE) Contact information at EDIRC.
Bibliographic data for series maintained by Andrea Willems () and Leonne Portz ().