Journal article 181 views 56 downloads
How do local banks respond to natural disasters?
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Duc Tam Nguyen
The European Journal of Finance, Pages: 1 - 26
Swansea University Author: Anh Do
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2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis GroupThis is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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DOI (Published version): 10.1080/1351847x.2022.2055969
Abstract
The increasing frequency and intensity of catastrophic natural disasters have the potential to stress and imperil banks to the point of compromised viability or even bankruptcy. Using data of approximately 907 domestic/local banks and Spatial Hazard Events and Losses Database for the United States d...
| Published in: | The European Journal of Finance |
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| ISSN: | 1351-847X 1466-4364 |
| Published: |
Informa UK Limited
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| Online Access: |
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| URI: | https://cronfa.swan.ac.uk/Record/cronfa63212 |
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| Abstract: |
The increasing frequency and intensity of catastrophic natural disasters have the potential to stress and imperil banks to the point of compromised viability or even bankruptcy. Using data of approximately 907 domestic/local banks and Spatial Hazard Events and Losses Database for the United States during the period 2010–2019, we explore how natural disasters impact bank stability. Our main findings support the aforementioned hypothesis that natural disasters decrease bank stability because total deposit and equity (capital) become more volatile and the bank is prone to increased lending margins, as well as a provision of loan loss. Thus, banks lose their competitiveness, ROA deteriorates, and Z-score becomes lower. Strong corporate governance and healthy financial strategy, nevertheless, assist bank recovery in the aftermath of these weather extreme events. Last but not least, we find a non-linear relationship between natural disasters and bank stability and posit the role of indemnity paid out from the Federal insurance programme (after natural hazards) in the high-damage group. |
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| College: |
Faculty of Humanities and Social Sciences |
| Start Page: |
1 |
| End Page: |
26 |