Information on Hot Stuff: Do Lenders Pay Attention?

79 Pages Posted: 28 Nov 2021 Last revised: 16 May 2022

See all articles by Emdad Islam

Emdad Islam

Monash University

Mandeep Singh

Imperial College Business School

Date Written: January 13, 2021

Abstract

Banks cut lending to borrowers from regions that experience an increase in abnormal temperature occurrences in the previous year. Banks pursue an active portfolio rebalancing strategy for their farm loan portfolios among counties with high market shares to avoid loan losses from borrowers’ damages from impending natural disasters. These lending cuts appear to occur in relatively large, geographically dispersed banks with lower capital ratios. Our study suggests that banks pay attention to market-level information on abnormal temperature occurrences and adapt their small farm-lending strategies even before a natural disaster strikes.

Keywords: Small Farm Loans, Abnormal Temperature, Market-Level Information, Credit Availability

JEL Classification: G21, Q14, Q15, Q51, Q54

Suggested Citation

Islam, Emdad and Singh, Mandeep, Information on Hot Stuff: Do Lenders Pay Attention? (January 13, 2021). Available at SSRN: https://ssrn.com/abstract=3971621 or http://dx.doi.org/10.2139/ssrn.3971621

Emdad Islam

Monash University ( email )

Wellington Road
Clayton, Victoria 3168
Australia

Mandeep Singh (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

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