Bank lending networks and the propagation of natural disasters

Ivanov, Ivan T.; Macchiavelli, Marco; Santos, João A. C.

doi:10.1111/fima.12388

Cited by 33 publications

(8 citation statements)

References 48 publications

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“…Academic implications: these findings together provide some important academic implications. Firstly, the existent and common argument is that serious natural disasters will lead to the unbalance of the financial system and impact the banks’ credit service (Brei et al, 2019 ; Cortés & Strahan, 2017 ; Ivanov et al, 2020 ). Climate risk is an important component of natural disasters.…”

Section: Discussionmentioning

confidence: 99%

“…First, it contributes to the growing literature investigating the impact of climate risk on credit supply (Campbell & Slack, 2011 ; Levine et al, 2018 ). A common argument is that serious natural disasters will lead to the unbalance of the financial system and impact the banks’ credit service (Brei et al, 2019 ; Cortés & Strahan, 2017 ; Ivanov et al, 2020 ). Expanding this argument, we contribute to this growing literature by presenting that the regular climate risks instead of the extreme climate events have been recognized by the banks and induced the changes in credit supply.…”

Section: Introductionmentioning

confidence: 99%

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The impact of climate risk on credit supply to private and public sectors: an empirical analysis of 174 countries

2022

Environ Dev Sustain

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In recent years, risk has been increasingly a long-term environmental problem that cannot be underestimated due to its tremendous impacts on various sectors including banking sector. Accordingly, the credit supply to private and public sectors is affected by the increased climate risk. In order to examine the climate risk effect from an international comparison, this paper empirically investigates the impact of climate risk on credit supply by using a sample of 174 countries during 2000–2019 from the perspective of the difference between private and public sectors. The results show that climate risk has a significant negative effect on the credit supply to private sector and a positive effect on that to the public sector. Further, we provide new evidence that the climate risk effect has a more significant effect on the private and public sector credit supply in the high-income countries than that in the low-income countries, suggesting a quick risk contagion in the high-income countries.

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Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The impact of climate risk on credit supply to private and public sectors: an empirical analysis of 174 countries

2022

Environ Dev Sustain

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“…where competing banks have similar access to information). For instance, banks increase lending in affected areas by decreasing financing in non‐affected areas (Ivanov, Macchiavelli and Santos, 2020), or where banks do not have branches (Cortés and Strahan, 2017). Furthermore, few papers analyse the effect of extreme weather events on funding sources other than bank lending, such as insurance companies (Collier et al ., 2020; MacLaren et al ., 2017), grants (Gallagher, Hartley and Rohlin, 2020), trade credit (Casey and O'Toole, 2014), business loans (De Mel, McKenzie and Woodruff, 2013) and government transfers (Gallagher, Hartley and Rohlin, 2020).…”

Section: Literature Review and Research Hypothesesmentioning

confidence: 99%

Alternative Finance after Natural Disasters

Baltas

Fiordelisi

Mare

2021

British J of Management

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In this paper, we show that alternative finance (e.g. private equity, crowdfunding and venture capital) is a key source of funding for firms that are affected by natural disasters. Using data on a large sample of US companies from 2010 to 2019, we provide robust empirical evidence that private funding increases within 3 months after the occurrence of a natural disaster. Panel data analysis at state level shows that extreme events cause at least an average increase of funding from alternative finance by 47% relative to firms in non-affected states. We also find that size, reliance on physical assets and age improve access to alternative finance after adverse natural events. Our empirical evidence highlights the key role of private lenders in providing financial resources to affected firms after extreme exogenous events. Disclaimer: This paper's findings, interpretations and conclusions are entirely those of the authors and do not necessarily represent the views of the World Bank, their Executive Directors or the countries they represent. We thank the editors of the British Journal of Management special issue: Douglas Cumming, Pawan Budhar and Geoffrey Wood. We would also like to thank the two anonymous referees for providing us with very constructive feedback and valuable comments. We thank for useful comments the participants at the conference on 'Entrepreneurial Finance in Honour of Mike Wright' and especially our discussant, Maimuna Akter.

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“…Cortes (2015), Chavaz (2016) and Schüwer et al (2018) document that local banks increase corporate lending following natural disasters, consistent with an increase in credit demand to rebuild. Cortes and Strahan (2017), Rehbein andOngena (2020), andIvanov et al (2022) document that banks cut lending to unaffected regions in the aftermath of disasters, possibly to accommodate the additional credit demand in affected regions. Ouazad and Kahn (2019), in turn, find that lenders are more likely to securitize mortgages in areas hit by hurricanes that lie outside of federal flood zones, suggesting that lenders rely on securitization to lay off their riskier exposures.…”

Section: Introductionmentioning

confidence: 99%