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Drying Up: The Effect of Drought on Corporate Loans with AnaCredit Data

Author

Listed:
  • Jan Janku
  • Tomas Karhanek
  • Simona Malovana
  • Ivan Trubelik

Abstract

This paper examines whether chronic physical climate risk affects corporate credit allocation. We focus on drought, one of the most salient climate-related risks for the Czech economy, and combine granular AnaCredit data with district-level measures of drought-related agricultural losses. Using almost 6 million bank-firm-month observations for nearly 140,000 firms between 2019 and 2023, we show that long-term drought exposure is associated with a significant contraction in new corporate lending. The effect is concentrated at the origination margin: newly originated credit declines by about 12 percent in drought-affected regions, while outstanding credit volumes adjust more gradually. The impact varies across bank-firm relationships, credit-exposure characteristics, and sectors, consistent with banks incorporating chronic physical climate risk primarily into new lending decisions rather than immediately reducing existing exposures.

Suggested Citation

  • Jan Janku & Tomas Karhanek & Simona Malovana & Ivan Trubelik, 2026. "Drying Up: The Effect of Drought on Corporate Loans with AnaCredit Data," Working Papers 2026/11, Czech National Bank, Research and Statistics Department.
    • Handle: RePEc:cnb:wpaper:2026/11
    as

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    File URL: https://www.cnb.cz/export/sites/cnb/en/economic-research/.galleries/research_publications/cnb_wp/cnbwp_2026_11.pdf
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    References listed on IDEAS

    as
    1. Ulrich Schüwer & Claudia Lambert & Felix Noth, 2019. "How Do Banks React to Catastrophic Events? Evidence from Hurricane Katrina," Review of Finance, European Finance Association, vol. 23(1), pages 75-116.
    2. Ivan T. Ivanov & Marco Macchiavelli & João A. C. Santos, 2022. "Bank lending networks and the propagation of natural disasters," Financial Management, Financial Management Association International, vol. 51(3), pages 903-927, September.
    3. Özsoy, S. Mehmet & Rasteh, Mehdi & Yönder, Erkan, 2025. "Understanding drought shocks: Bank financial stability and loan performance," Global Finance Journal, Elsevier, vol. 65(C).
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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