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Banking on Snow: Bank Capital, Risk, and Employment

Author

Listed:
  • Baumgartner, Simon

    (Humboldt University Berlin, Germany)

  • Stomper, Alex

    (Humboldt University Berlin, Germany)

  • Schober, Thomas

    (Auckland University of Technology, New Zealand)

  • Winter-Ebmer, Rudolf

    (Johannes Kepler University Linz, Austria)

Abstract

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms’ local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this employment, and the effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks’ borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well-capitalized banks support economic adaptation to climate change.

Suggested Citation

  • Baumgartner, Simon & Stomper, Alex & Schober, Thomas & Winter-Ebmer, Rudolf, 2022. "Banking on Snow: Bank Capital, Risk, and Employment," IHS Working Paper Series 43, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihswps:43
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    File URL: https://irihs.ihs.ac.at/id/eprint/6298
    File Function: First version, 2022
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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