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Natural disaster and bank stability: Evidence from the U.S. financial system

Felix Noth and Ulrich Schüwer

No 167, SAFE Working Paper Series from Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt

Abstract: We document that natural disasters significantly weaken the stability of banks with business activities in affected regions, as reflected in lower z-scores, higher probabilities of default, higher non-performing assets ratios, higher foreclosure ratios, lower returns on assets and lower bank equity ratios. The effects are economically relevant and suggest that insurance payments and public aid programs do not sufficiently protect bank borrowers against financial difficulties. We also find that the adverse effects on bank stability dissolve after some years if no further disasters occur in the meantime.

Keywords: natural disasters; bank stability; non-performing assets; bank performance (search for similar items in EconPapers)
JEL-codes: G21 Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-rmg
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:167

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