This paper examines the impact of natural disaster experiences on banks’ business practices. Using earthquake and banking data for California, we find that banks that have had stronger earthquake experiences change their practices, both as a result of the natural disasters’ effects on local deposit supply and through changes in banks’ risk perceptions. These banks have a smaller exposure to real estate, maintain higher equity levels, and are more likely to lend to high-income borrowers. This paper confirms, therefore, that institutional memory exists in the banking sector and that banks and communities adapt to natural disasters interactively.
|Series||GSBE Research Memoranda|
- d53 - General Equilibrium and Disequilibrium: Financial Markets
- d83 - "Search; Learning; Information and Knowledge; Communication; Belief"
- g11 - "Portfolio Choice; Investment Decisions"
- g21 - "Banks; Depository Institutions; Micro Finance Institutions; Mortgages"
- q54 - "Climate; Natural Disasters; Global Warming"
- environmental economics
- Financial Economics and Financial Manageemnt