Bank Lending Networks and the Propagation of Natural Disasters

Financial Management 51(3), 903-927, 2022.

44 Pages Posted: 14 Mar 2020 Last revised: 19 Sep 2023

See all articles by Ivan Ivanov

Ivan Ivanov

Federal Reserve Bank of Chicago

Marco Macchiavelli

Isenberg School of Management

João A. C. Santos

Federal Reserve Bank of New York; Nova School of Business and Economics

Date Written: May 6, 2020

Abstract

We study how syndicated lending networks propagate natural disasters. Natural disasters lead to an increase in corporate credit demand in affected regions. Banks meet the increase in credit demand in part by reducing credit to distant regions, unaffected by disasters. Capital constraints play a key role in this effect as lower-capital banks propagate disasters to unaffected regions to a greater extent. While shadow banks offset the reduction in bank credit supply on term loan syndicates, they do not offset the loss in credit line financing. As a result, corporate credit in unaffected regions falls by approximately 3%.

Keywords: Natural disasters, Syndicated loans, Bank networks, Shadow banks

JEL Classification: G21, G23, Q54

Suggested Citation

Ivanov, Ivan and Macchiavelli, Marco and Santos, João A. C., Bank Lending Networks and the Propagation of Natural Disasters (May 6, 2020). Financial Management 51(3), 903-927, 2022. , Available at SSRN: https://ssrn.com/abstract=3541335 or http://dx.doi.org/10.2139/ssrn.3541335

Ivan Ivanov (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://ivantivanov.com

Marco Macchiavelli

Isenberg School of Management ( email )

Amherst, MA 01003
United States

João A. C. Santos

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: http://HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

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