After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters

96 Pages Posted: 16 Apr 2024

See all articles by Benjamin Collier

Benjamin Collier

Temple University - Risk Management & Insurance & Actuarial Science

Sabrina T Howell

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Lea Rendell

University of Maryland, College Park

Multiple version iconThere are 2 versions of this paper

Date Written: April 4, 2024

Abstract

Does emergency credit prevent long-term financial distress? We study the causal effects of government-provided recovery loans to small businesses following natural disasters. The rapid financial injection might enable viable firms to survive and grow or might hobble precarious firms with more risk and interest obligations. We show that the loans reduce exit and bankruptcy, increase employment and revenue, unlock private credit, and reduce delinquency. These effects, especially the crowding-in of private credit, appear to reflect resolving uncertainty about repair. We do not find capital reallocation away from neighboring firms and see some evidence of positive spillovers on local entry.

Keywords: Financing frictions, natural disasters, climate change adaptation, entrepreneurship, government credit

JEL Classification: G21, G32, H81, Q54, R33

Suggested Citation

Collier, Benjamin and Howell, Sabrina T and Rendell, Lea, After the Storm: How Emergency Liquidity Helps Small Businesses Following Natural Disasters (April 4, 2024). Available at SSRN: https://ssrn.com/abstract=4784537 or http://dx.doi.org/10.2139/ssrn.4784537

Benjamin Collier

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

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

Sabrina T Howell (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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HOME PAGE: http://www.sabrina-howell.com

National Bureau of Economic Research (NBER) ( email )

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Lea Rendell

University of Maryland, College Park ( email )

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