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After the Storm: How Emergency Liquidity Helps Businesses Following Natural Disasters

Author

Listed:
  • Benjamin L. Collier
  • Sabrina T. Howell
  • Lea Rendell

Abstract

Severe climate events create financial distress for businesses. Can emergency credit help? We study the causal effects of government-provided business recovery loans. Our data include loan applications from over 167,000 firms representing 1,900 distinct disasters, which we merge with census records and business credit reports. We follow firms for seven years after experiencing a disaster across a rich set of real and financial outcomes. We find that recovery loans help firms survive, reducing exit and bankruptcy. They also increase employment. Our results suggest that in the disruptive aftermath of a natural disaster, businesses that need funds to recover often struggle to access credit from private lenders. Recovery loans crowd in private credit, which may reflect resolving private-lender uncertainty about repair feasibility.

Suggested Citation

  • Benjamin L. Collier & Sabrina T. Howell & Lea Rendell, 2024. "After the Storm: How Emergency Liquidity Helps Businesses Following Natural Disasters," NBER Working Papers 32326, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32326
    Note: CF EEE PE PR
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    Cited by:

    1. Acebo, Enrique & Gutiérrez-López, Cristina & Abad-González, Julio & Miguel-Dávila, José-Ángel, 2026. "Lazarus, come forth! Public loan guarantees and the recovery of zombie firms," Economic Modelling, Elsevier, vol. 154(C).
    2. Benjamin L. Collier & Daniel A. Hartley & Benjamin J. Keys & Jing Xian Ng, 2024. "Credit When You Need It," NBER Working Papers 32845, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • 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
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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