Financing Negative Shocks: Evidence from Hurricane Harvey

Benjamin L. Collier, Lawrence S. Powell, Marc A. Ragin, and
Xuesong You

♦ 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, though non-flooded 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 post-disaster. 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.

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