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Natural disasters and the role of regional lenders in economic recovery

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  • Celil, Hursit S.
  • Oh, Seungjoon
  • Selvam, Srinivasan

Abstract

We find that Chinese regional state-owned City-Commercial Banks (CCBs) landlocked by their remit to operate within a city, respond to natural disasters more effectively by aggressively expanding credit, especially to corporate borrowers. The credit expansion is robust to a difference-in-differences specification and is unobservable among non-CCBs in the same city. Moreover, the expansion is more pronounced in CCBs with high state ownership and those that are private. Despite the additional CCB lending, we do not find a drop in asset quality, and using satellite-based city night lights, we find post-disaster cities that experience greater CCB credit expansion enjoy stronger economic recoveries. Overall, our findings highlight the critical role played by regional state-owned lenders in economic recovery from increasingly frequent natural disasters.

Suggested Citation

  • Celil, Hursit S. & Oh, Seungjoon & Selvam, Srinivasan, 2022. "Natural disasters and the role of regional lenders in economic recovery," Journal of Empirical Finance, Elsevier, vol. 68(C), pages 116-132.
    • Handle: RePEc:eee:empfin:v:68:y:2022:i:c:p:116-132
    DOI: 10.1016/j.jempfin.2022.07.006
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    1. Vinzenz Peters & Jingtian Wang & Mark Sanders, 2023. "Resilience to extreme weather events and local financial structure of prefecture-level cities in China," Climatic Change, Springer, vol. 176(9), pages 1-21, September.

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