This study examines how geographically diversified banks adjust lending practices in response to abnormal hot temperatures, a proxy for climate risk, and finds that these banks reduce small farm lending by 2–3 percent more than geographically constrained banks after a standard deviation increase in abnormal temperatures. Geographically diversified banks demonstrate proactive portfolio risk management by prioritizing credit in core markets and reallocating funds away from high-risk non-core regions, leaving lending gaps in affected counties. These findings highlight the importance of geographic diversification in building climate resiliency for banks while reducing the total credit available to farmers in a region.

Abstract In the Australian real estate market, about a third of properties are sold at auction. Properties that fail auctions sell later for a 1.3 percent discount. Consistent with a causal channel, the effect holds with property-level fixed effects and when auction failure is instrumented by adverse weather or seller overvaluation. Prices cluster below round numbers, and the discount fades over time, inconsistent with our effects reflecting unobserved property characteristics. The evidence suggests that there are behavioral factors affecting the valuations of buyers and sellers.