Natural Disaster and Bank Stability: Evidence from the U.S. Financial System
61 Pages Posted: 21 Feb 2017 Last revised: 20 Jun 2023
Date Written: April 25, 2018
We show that weather-related natural disasters in the United States significantly weaken the financial stability of banks with business activities in affected regions. This is reflected in higher probabilities of default, lower z-scores, higher non-performing assets ratios, higher foreclosure ratios, lower returns on assets and lower equity ratios of affected banks in the years following a natural disaster. The effects are economically relevant and highlight the financial vulnerability of banks and their borrowers despite insurances and public aid programs.
Keywords: natural disasters, bank stability, non-performing assets, bank performance
JEL Classification: G21, Q54
Suggested Citation: Suggested Citation