Finance Seminar（2019-03)

Topic: Exogenous Shocks and Real Effects of Financial Constraints: Loan- and Firm-Level Evidence around Natural Disasters

Speaker: Ai He, Emory University

Time: Monday, 14 January, 10:00-11:30

Location: Room 217, Guanghua Building 2

Abstract:

This article studies how non-economic, exogenous shocks on a subset of borrowers constrain bank lending and affect real economic activities of non-shocked firms. I separate a loan supply effect from a loan demand effect by identifying borrower-level shocks with the occurrence of major U.S. natural disasters. Financially-constrained banks reallocate postdisaster lending by restricting credit supply as well as increasing loan pricing to non-shocked firms, but prioritizing the disaster firms with which they have strong pre-disaster relationships. I find one dollar of additional lending to disaster firms is associated with 11.5 cents declines of the same bank’s lending to non-shocked firms. Non-shocked firms’ pre-disaster dependence on such banks for financing accounts for economically significant reductions of their total received lending, investment, profitability, and sales-growth in the year following a natural disaster. Consistent with frictions deriving from asymmetric information, the real outcome losses are larger for financially-constrained firms.

Introduction:

Ai He is a PhD candidate in Finance at the Goizueta Business School of Emory University. She holds a B.B.A. in Management Information Systems and MS-PhD Program (course work) from Shanghai Jiao Tong University. Her research interests include Financial Intermediaries and Institutions, Empirical Asset Pricing, Investment, Credit Markets.

//www.aihefinance.com/

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