Do Banks Overreact to Disaster Risk?
Prof. Feng (Jack) JIANG
Associate Professor of Finance
University at Buffalo
Date: 2 August 2024 (Friday)
Time: 10:30 am – 12:00 pm
Venue: E22-G015
Host: Prof. Tingting QUE, Associate Professor in Finance
Abstract
We examine how banks respond to natural disasters when borrowers are adjacent to the disaster area. We find robust evidence that banks charge significantly higher spreads to firms located in these areas following a disaster than they charge to other firms. The observed effect is transitory, and stronger for disasters with higher media coverage and when loan officers are geographically closer to the disasters. The increased financing cost causes firms to experience capital constraints. Overall, our findings indicate that banks are subject to salience bias when assessing their clients’ natural disaster risk, and such bias has real effects on corporate firms.
Speaker
Prof. Feng JIANG is an associate professor of finance at the School of Management of the University of Buffalo (SUNY). His research interests include behavioral finance, corporate finance, and household finance. His papers are published or forthcoming in top finance and accounting journals such as Journal of Financial Economics, Review of Financial Studies, Journal of Accounting Research, and Journal of Financial and Quantitative Analysis.
All are welcome!
