Natural Disasters and Firm Leasing: A Collateral Channel

Abstract

This paper studies the role of lease financing in disaster-affected firms under collateral constraints.
Disaster-affected firms demand funds for post-disaster reconstruction. However, the destruction of natural disasters leads to collateral constraints, which create external financing frictions. I find that affected firms obtain financing through operating leases after natural disasters. The significance of the findings highlights the importance of operating leases for collateral-constrained firms.

Keywords: Natural disasters, environmental risk, operating lease, financing, collateral constraints, debt capacity

JEL Classification: G0, G3