@article{8ea99a2a8545431ca922b4accbeed512,
title = "Hazardous lending: The impact of natural disasters on bank asset portfolio",
abstract = "This paper examines how banks adjust their asset structure in response to changes in loan demand following natural disasters. We demonstrate how banks' asset diversification strategy helps clients smooth consumption and supports local recovery. In the empirical section, we apply the difference-in-differences method and determine that U.S. commercial banks increase real estate lending after disasters and sell government bonds to finance this disaster-driven credit surge. The theoretical section presents a novel multiple-asset dynamic credit allocation model that explains our empirical findings. We use model simulations to predict and quantify the potential impact of climate change on the asset structure and profitability of banks given different scenarios.",
keywords = "Banks, Disasters, Diversification, Climate change, RARE DISASTERS, AGENCY COSTS, NET WORTH, RISK, CREDIT, MARKETS, PRICES, UNCERTAINTY, SELECTION, MODEL",
author = "J.W.B. Bos and R.L. Li and M.W.J.L. Sanders",
note = "data source: Data from US Banking {"}Call Reports{"} and EMDAT for natural hazards, all publicly available",
year = "2022",
month = mar,
day = "1",
doi = "10.1016/j.econmod.2022.105760",
language = "English",
volume = "108",
journal = "Economic Modelling",
issn = "0264-9993",
publisher = "Elsevier",
}