Natural disasters and economic growth: the role of banking market structure

Andi Duqi; Danny McGowan; Enrico Onali; Giuseppe Torluccio

doi:10.1016/j.jcorpfin.2021.102101

Natural disasters and economic growth: the role of banking market structure

Andi Duqi, Danny McGowan, Enrico Onali, Giuseppe Torluccio

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Abstract

Following a natural disaster, the rate of economic growth recovers faster in less competitive banking markets. A 10% reduction in competition increases the rate of economic growth by 0.3%. In less competitive markets, banks respond to a disaster by increasing the supply of real estate credit by refinancing mortgage loans but do not lend more to businesses or consumers. Instead, government agencies provide disaster loans to affected businesses and households. Smaller, profitable and well-capitalized institutions that rely more on traditional retail banking originate most mortgage credit.

Original language	English
Article number	102101
Journal	Journal of Corporate Finance
Volume	71
Early online date	21 Oct 2021
DOIs	https://doi.org/10.1016/j.jcorpfin.2021.102101
Publication status	Published - Dec 2021

Bibliographical note

Funding Information:
We thank the editor (Heitor Almeida), two anonymous referees, attendants at the research seminar held at the Department of Management, University of Bologna in April 2019, and participants at the Responsible Business Symposium held in Birmingham in September 2021.

Keywords

Disasters
Economic growth
Banks

ASJC Scopus subject areas

Economics and Econometrics
Business and International Management
Finance
Strategy and Management

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jcorpfin.2021.102101Licence: Creative Commons: Attribution-NonCommercial-NoDerivs (CC BY-NC-ND)

DuqiA2021NaturalFinal published version, 616 KBLicence: Creative Commons: Attribution-NonCommercial-NoDerivs (CC BY-NC-ND)

Cite this

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title = "Natural disasters and economic growth: the role of banking market structure",

abstract = "Following a natural disaster, the rate of economic growth recovers faster in less competitive banking markets. A 10% reduction in competition increases the rate of economic growth by 0.3%. In less competitive markets, banks respond to a disaster by increasing the supply of real estate credit by refinancing mortgage loans but do not lend more to businesses or consumers. Instead, government agencies provide disaster loans to affected businesses and households. Smaller, profitable and well-capitalized institutions that rely more on traditional retail banking originate most mortgage credit.",

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AU - Onali, Enrico

AU - Torluccio, Giuseppe

N1 - Funding Information: We thank the editor (Heitor Almeida), two anonymous referees, attendants at the research seminar held at the Department of Management, University of Bologna in April 2019, and participants at the Responsible Business Symposium held in Birmingham in September 2021.

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Natural disasters and economic growth: the role of banking market structure

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

UN SDGs

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