Natural Disasters, Damage to Banks, and Firm Investment

36 Pages Posted: 15 Nov 2016

See all articles by Kaoru Hosono

Kaoru Hosono

Gakushuin University - Economics

Daisuke Miyakawa

Hitotsubashi University

Taisuke Uchino

Daito Bunka University

Makoto Hazama

Hitotsubashi University

Arito Ono

Chuo University

Hirofumi Uchida

Kobe University - Graduate School of Business Administration

Iichiro Uesugi

Hitotsubashi University

Date Written: November 2016

Abstract

This article investigates the effect of banks’ lending capacity on firms’ investment. To identify exogenous shocks to loan supply, we utilize the natural experiment provided by Japan's Great Hanshin‐Awaji earthquake in 1995. Using a unique data set that allows us to identify firms and banks in the earthquake‐affected areas, we find that the investment ratio of firms located outside the earthquake‐affected areas but having a main bank inside the areas was significantly smaller than that of firms located outside the areas and having a main bank outside the areas. Our findings suggest that loan supply shocks affect firm investment.

Suggested Citation

Hosono, Kaoru and Miyakawa, Daisuke and Uchino, Taisuke and Hazama, Makoto and Ono, Arito and Uchida, Hirofumi and Uesugi, Iichiro, Natural Disasters, Damage to Banks, and Firm Investment (November 2016). International Economic Review, Vol. 57, Issue 4, pp. 1335-1370, 2016, Available at SSRN: https://ssrn.com/abstract=2869493 or http://dx.doi.org/10.1111/iere.12200

Kaoru Hosono (Contact Author)

Gakushuin University - Economics ( email )

1-5-1 Mejiro, Toshima-ku
Tokyo 171-8588
Japan

Daisuke Miyakawa

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Taisuke Uchino

Daito Bunka University ( email )

Makoto Hazama

Hitotsubashi University

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Arito Ono

Chuo University ( email )

2nd floor Blg 4 Tampa Campus
742-1 Higashinakano, Hachioji
Tokyo 192-03
Japan

HOME PAGE: http://https://sites.google.com/site/aritoono/Home

Hirofumi Uchida

Kobe University - Graduate School of Business Administration ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501
Japan
81-78-803-6949 (Phone)

HOME PAGE: http://www.b.kobe-u.ac.jp/~uchida

Iichiro Uesugi

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8306
Japan
+81-42-580-8348 (Phone)

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