Financing Negative Shocks: Evidence from Hurricane Harvey

52 Pages Posted: 7 Jan 2021 Last revised: 28 Apr 2023

See all articles by Benjamin Collier

Benjamin Collier

Temple University - Risk Management & Insurance & Actuarial Science

Lars Powell

University of Alabama - Culverhouse College of Commerce & Business Administration

Marc A. Ragin

University of Georgia; University of Georgia - Department of Insurance, Legal Studies, Real Estate

Xuesong You

Federal Home Loan Mortgage Corporation (FHLMC)

Date Written: December 3, 2020

Abstract

We examine the effects of a severe climate event on local firms. Our data include 8,218 business credit reports and a detailed survey of 273 businesses in the area affected by Hurricane Harvey. Delinquent credit balances doubled in areas with the worst flooding, though non-flooded areas also had significant impairments. Only independent businesses showed signs of distress; subsidiaries of larger firms did not. Firms were largely uninsured and often were denied credit post-disaster. Many funded recovery informally, such as through friends and family. Our findings suggest that existing financial frictions compound the challenges posed by a severe climate event.

Keywords: Climate Risk, Financing Frictions, Corporate Risk Management, Disaster Recovery

JEL Classification: D22, G32, G33, Q54

Suggested Citation

Collier, Benjamin and Powell, Lawrence and Ragin, Marc A. and Ragin, Marc A. and You, Xuesong, Financing Negative Shocks: Evidence from Hurricane Harvey (December 3, 2020). Available at SSRN: https://ssrn.com/abstract=3741812 or http://dx.doi.org/10.2139/ssrn.3741812

Benjamin Collier (Contact Author)

Temple University - Risk Management & Insurance & Actuarial Science ( email )

Fox School of Business and Management
1301 Cecil B. Moore Ave.
Philadelphia, PA 19122
United States

Lawrence Powell

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States

Marc A. Ragin

University of Georgia ( email )

610 S Lumpkin Street
Moore-Rooker A417
Athens, GA 30602-6254
United States
7067132775 (Phone)

University of Georgia - Department of Insurance, Legal Studies, Real Estate ( email )

610 S Lumpkin Street
Moore-Rooker A417
Athens, GA 30602-6254
United States
7067132775 (Phone)

Xuesong You

Federal Home Loan Mortgage Corporation (FHLMC) ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

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