The Effect of Natural Disasters on Bank Failures

25 Pages Posted: 8 Oct 2014

See all articles by Felix Noth

Felix Noth

Otto-von-Guericke-Universität Magdeburg; Halle Institute for Economic Research

Ulrich Schüwer

University of Bonn - Institute for Financial Economics and Statistics; Research Center SAFE at Goethe University Frankfurt

Date Written: March 12, 2014

Abstract

We tests whether natural disasters have an effect on failure probabilities of banks in affected regions. Using data on property damages from hurricanes, earthquakes and other natural disasters in the U.S. from 1976 to 2010, we show that natural disasters significantly increase the failure probabilities of banks. This effect prevails when controlling for bank characteristics that are typically associated with bank failures. Surprisingly, our results suggest that banks are not more likely to fail due to disaster damage in the short-term period after a natural disaster occurs, but in the medium-term period.

Keywords: natural disasters, bank failures

Suggested Citation

Noth, Felix and Schüwer, Ulrich, The Effect of Natural Disasters on Bank Failures (March 12, 2014). Available at SSRN: https://ssrn.com/abstract=2506710 or http://dx.doi.org/10.2139/ssrn.2506710

Felix Noth (Contact Author)

Otto-von-Guericke-Universität Magdeburg ( email )

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany

Halle Institute for Economic Research

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
Halle, 06108
Germany

HOME PAGE: http://www.iwh-halle.de/asp/person.asp?fnh&Lang=e&Abteilung=fin

Ulrich Schüwer

University of Bonn - Institute for Financial Economics and Statistics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany

HOME PAGE: http://www.finance.uni-bonn.de/

Research Center SAFE at Goethe University Frankfurt ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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