IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-16-00318.html
   My bibliography  Save this article

Natural Disaster and Local Bank Non-Performing Loan: Case of Nias Tsunami 2004

Author

Listed:
  • Rayenda Brahmana

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

  • Chin hong Puah

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

  • Michael Chai

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

Abstract

There is dilemma of Indonesia government to give fund relief in assisting the non—performing credit of natural disaster-affected area. This is due to the argument that natural disaster may not have any impact on banking performance of those affected areas. The fund relief is accused as another moral hazard from government. Hence, this research aims to investigate the effects of natural disaster on the local bank non-performing loan. We use event study and pair t-test to examine the effects of Nias tsunami on Indonesian banking sector. The study is motivated by the hypothesis that there are impacts towards the Indonesian banking institution before and after the natural disaster happens in 2004. The results show that there are increment in the good and under-supervision credit rating, while the other credit rating has decrement after the event. This might be due to the regulation the restriction of loan borrowing to mitigate the crisis hit towards the banking profitability. The NPL of local bank is also significantly different between before and after the tsunami. Using event study approach, the results shows also the significant impact of Aceh Tsunami on local bank non-performing loan.

Suggested Citation

  • Rayenda Brahmana & Chin hong Puah & Michael Chai, 2016. "Natural Disaster and Local Bank Non-Performing Loan: Case of Nias Tsunami 2004," Economics Bulletin, AccessEcon, vol. 36(4), pages 2413-2421.
    • Handle: RePEc:ebl:ecbull:eb-16-00318
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I4-P233.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stéphane Hallegatte & Valentin Przyluski, 2010. "The Economics of Natural Disasters," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(02), pages 14-24, July.
    2. Mr. Cornelis N Gorter & Mr. Adriaan M. Bloem, 2001. "The Treatment of Nonperforming Loans in Macroeconomic Statistics," IMF Working Papers 2001/209, International Monetary Fund.
    3. Noy, Ilan, 2009. "The macroeconomic consequences of disasters," Journal of Development Economics, Elsevier, vol. 88(2), pages 221-231, March.
    4. Strobl, Eric, 2012. "The economic growth impact of natural disasters in developing countries: Evidence from hurricane strikes in the Central American and Caribbean regions," Journal of Development Economics, Elsevier, vol. 97(1), pages 130-141.
    5. Paulo Guimaraes & Frank L. Hefner & Douglas P. Woodward, 1993. "Wealth And Income Effects Of Natural Disasters: An Econometric Analysis Of Hurricane Hugo," The Review of Regional Studies, Southern Regional Science Association, vol. 23(2), pages 97-114, Fall.
    6. Froot, Kenneth A. & Stein, Jeremy C., 1998. "Risk management, capital budgeting, and capital structure policy for financial institutions: an integrated approach," Journal of Financial Economics, Elsevier, vol. 47(1), pages 55-82, January.
    7. Eduardo Cavallo & Sebastian Galiani & Ilan Noy & Juan Pantano, 2013. "Catastrophic Natural Disasters and Economic Growth," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1549-1561, December.
    8. Yanos Zylberberg, 2010. "Natural natural disasters and economic disruption," PSE Working Papers halshs-00564946, HAL.
    9. Louzis, Dimitrios P. & Vouldis, Angelos T. & Metaxas, Vasilios L., 2012. "Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1012-1027.
    10. Yanos Zylberberg, 2010. "Natural natural disasters and economic disruption," Working Papers halshs-00564946, HAL.
    11. Matthew E. Kahn, 2005. "The Death Toll from Natural Disasters: The Role of Income, Geography, and Institutions," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 271-284, May.
    12. Kaoru Hosono & Daisuke Miyakawa & Taisuke Uchino & Makoto Hazama & Arito Ono & Hirofumi Uchida & Iichiro Uesugi, 2016. "Natural Disasters, Damage To Banks, And Firm Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(4), pages 1335-1370, November.
    13. Toya, Hideki & Skidmore, Mark, 2007. "Economic development and the impacts of natural disasters," Economics Letters, Elsevier, vol. 94(1), pages 20-25, January.
    14. Hallegatte, Stephane & Przyluski, Valentin, 2010. "The economics of natural disasters : concepts and methods," Policy Research Working Paper Series 5507, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wan-Li Zhang & Chun-Ping Chang & Yang Xuan, 2022. "The impacts of climate change on bank performance: What’s the mediating role of natural disasters?," Economic Change and Restructuring, Springer, vol. 55(3), pages 1913-1952, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lazzaroni, Sara & van Bergeijk, Peter A.G., 2014. "Natural disasters' impact, factors of resilience and development: A meta-analysis of the macroeconomic literature," Ecological Economics, Elsevier, vol. 107(C), pages 333-346.
    2. Matteo Coronese & Davide Luzzati, 2022. "Economic impacts of natural hazards and complexity science: a critical review," LEM Papers Series 2022/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Noy, Ilan & Yonson, Rio, 2016. "A survey of the theory and measurement of economic vulnerability and resilience to natural hazards," Working Paper Series 19394, Victoria University of Wellington, School of Economics and Finance.
    4. Felbermayr, Gabriel & Gröschl, Jasmin, 2014. "Naturally negative: The growth effects of natural disasters," Journal of Development Economics, Elsevier, vol. 111(C), pages 92-106.
    5. Ilan Noy & Rio Yonson, 2018. "Economic Vulnerability and Resilience to Natural Hazards: A Survey of Concepts and Measurements," Sustainability, MDPI, vol. 10(8), pages 1-16, August.
    6. F. Zhou & W.J.W. Botzen, 2017. "The Impact of Natural Disasters on Firm Growth in Vietnam:: Interaction with Financial Constraints," Working Papers 17-20, Utrecht School of Economics.
    7. Loayza, Norman V. & Olaberría, Eduardo & Rigolini, Jamele & Christiaensen, Luc, 2012. "Natural Disasters and Growth: Going Beyond the Averages," World Development, Elsevier, vol. 40(7), pages 1317-1336.
    8. Johanna Choumert-Nkolo & Anaïs Lamour & Pascale Phélinas, 2021. "The Economics of Volcanoes," Economics of Disasters and Climate Change, Springer, vol. 5(2), pages 277-299, July.
    9. Rio Yonson & Ilan Noy, 2018. "Measurement of Economic Welfare Risk and Resilience of the Philippine Regions," CESifo Working Paper Series 6953, CESifo.
    10. Jere Lehtomaa & Clément Renoir, 2023. "The Economic Impact of Tropical Cyclones: Case Studies in General Equilibrium," CER-ETH Economics working paper series 23/382, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    11. Yang Zhou & Ning Li & Wenxiang Wu & Haolong Liu & Li Wang & Guangxu Liu & Jidong Wu, 2014. "Socioeconomic development and the impact of natural disasters: some empirical evidences from China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 74(2), pages 541-554, November.
    12. Thomas Steinwachs, 2019. "Geography Matters: Spatial Dimensions of Trade, Migration and Growth," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 81.
    13. Fujin Zhou & Wouter Botzen, 2021. "Firm Level Evidence of Disaster Impacts on Growth in Vietnam," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 79(2), pages 277-322, June.
    14. Felbermayr, Gabriel & Gröschl, Jasmin & Sanders, Mark & Schippers, Vincent & Steinwachs, Thomas, 2018. "Shedding Light on the Spatial Diffusion of Disasters," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181556, Verein für Socialpolitik / German Economic Association.
    15. Sven Kunze, 2021. "Unraveling the Effects of Tropical Cyclones on Economic Sectors Worldwide: Direct and Indirect Impacts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(4), pages 545-569, April.
    16. De Bandt Olivier, & Jacolin Luc, & Lemaire Thibault., 2021. "Climate Change in Developing Countries: Global Warming Effects,Transmission Channels and Adaptation Policies," Working papers 822, Banque de France.
    17. Ouattara, Bazoumana & Strobl, Eric, 2013. "The fiscal implications of hurricane strikes in the Caribbean," Ecological Economics, Elsevier, vol. 85(C), pages 105-115.
    18. Chen, Xia & Zhao, Xinxin & Chang, Chun-Ping, 2023. "The shocks of natural disasters on NPLs: Global evidence," Economic Systems, Elsevier, vol. 47(1).
    19. Hayakawa, Kazunobu & Matsuura, Toshiyuki & Okubo, Fumihiro, 2015. "Firm-level impacts of natural disasters on production networks: Evidence from a flood in Thailand," Journal of the Japanese and International Economies, Elsevier, vol. 38(C), pages 244-259.
    20. Peter A. G. van Bergeijk & Sara Lazzaroni, 2015. "Macroeconomics of Natural Disasters: Strengths and Weaknesses of Meta‐Analysis Versus Review of Literature," Risk Analysis, John Wiley & Sons, vol. 35(6), pages 1050-1072, June.

    More about this item

    Keywords

    Aceh Tsunami; Non-Performing Loan; Natural Disaster;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • H0 - Public Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-16-00318. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.