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Journal of Financial and Quantitative Analysis Vol. 60 No. 3 2025

Financing Negative Shocks: Evidence from Hurricane Harvey

Benjamin Collier1; Lawrence Powell2; Marc A. Ragin3; Xuesong You4

1 Temple University Fox School of Business · 2 University of Alabama Culverhouse College of Business · 3 University of Georgia Terry College of Business · 4 Federal Home Loan Mortgage Corporation

open access

Abstract

We examine the effects of a severe climate event on local firms. Our data include 8,218 business credit reports and a detailed survey of 273 businesses in the area affected by Hurricane Harvey. Delinquent credit balances doubled in areas with the worst flooding, although nonflooded areas also had significant credit impairments. Only independent businesses showed signs of distress; subsidiaries of larger firms did not. Firms were largely uninsured and often were denied credit postdisaster. Many funded recovery informally, such as through friends and family. Our findings suggest that several financial frictions compound the challenges posed by a severe climate event.

DOI
10.1017/s0022109024000103
Volume
60
Issue
3
Pages
1342-1372
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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