Do Banks Overreact to Climatic Disaster Risk?

Office of Alumni and External Relations    2021-05-25

Do Banks Overreact to Climatic Disaster Risk?

Guest: Qianqian Huang, Assistant Professor of Finance, City University of Hong Kong

Host: Xu Wenjian, Associate Professor, Antai

Time: Wednesday, May 26th, 2021,  10:00-11:30

Venue: Tencent Conference (if teachers and students need conference number and password, please send email to obtain)


We examine how banks respond to large natural disasters when corporate borrowers are located in the neighborhood of the disaster area. We find robust evidence that banks charge significantly higher loan spreads for firms located in the neighborhood of the disaster area than for remote firms. The results are not driven by regional spillovers, limited credit supply, lender rent extraction motive, or rational learning. We also find that banks' reaction is transitory, and is less pronounced for experienced banks. Overall, our empirical findings indicate that banks are subject to salience bias when assessing their clients' natural disaster risk.


Qianqian Huang is an Associate Professor of Economics and Finance at the City University of Hong Kong. She obtained her PhD in Finance from the University of Iowa. Her major research interests lie in the field of empirical corporate finance. In particular, her current research has focused on mergers and acquisitions, corporate governance and network economics. Her work has been published in top finance journals including Journal of Financial Economics, Journal of Financial and Quantitative Analysis, etc.

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