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Medientyp:
E-Artikel
Titel:
Flooded Through the Back Door: The Role of Bank Capital in Local Shock Spillovers
Beteiligte:
Rehbein, Oliver;
Ongena, Steven
Erschienen:
Cambridge University Press (CUP), 2022
Erschienen in:Journal of Financial and Quantitative Analysis
Sprache:
Englisch
DOI:
10.1017/s0022109022000321
ISSN:
0022-1090;
1756-6916
Entstehung:
Anmerkungen:
Beschreibung:
<jats:title>Abstract</jats:title><jats:p>This article demonstrates that low bank capital carries a negative externality because it amplifies local shock spillovers. We exploit a natural disaster that is transmitted to firms in nondisaster areas via their banks. Firms connected to a strongly disaster-exposed bank with lowest-quartile capitalization significantly reduce their total borrowing by 6.6% and tangible assets by 6.9% compared to similar firms connected to a well-capitalized bank. These findings translate to negative regional effects on GDP and unemployment. Additionally, following a disaster event, banks reduce their exposure to currently unaffected but generally disaster-prone areas.</jats:p>