Year: 2026
Type: article
Abstract: Despite the increasing frequency and cost of climate disasters, prior research finds that these disasters have had minimal effects on banks’ accounting performance to date, and it has devoted limited attention to how bank activities shape societal exposure to the disasters. We conduct three analyses to address this puzzle and gap. First, we examine the share price reactions of public banks operating in counties affected by billion-dollar climate disasters in 1994−2024. We find that on average these banks lost market value around the disasters exceeding ten percent of the estimated damage costs, with this percentage more than doubling from the first to second halves of the period. We further find that affected banks’ share returns are more sensitive to disaster damage costs in states with higher homeowners insurance policy cancellation/non-renewal rates and financially weaker property-casualty insurers, and when these banks are systemically unimportant or operate in counties at higher risk to the type of disaster. Second, we show that banks’ county-level residential mortgage lending is positively associated with property exposures to climate disasters and FEMA appropriations when disasters occur. Finally, we show that banks open new branches in counties that experience growth in socially advantaged population, especially counties with high climate risks of the three types toward which population is moving: hurricane, water stress, and wildfire. Given accelerating climate change, property-casualty insurers backing away from climate-risky counties, and FEMA’s uncertain funding and status, our evidence highlights growing climate-related costs for banks and society, and it raises concerns about societal equity.
Source: Review of Accounting Studies
Authors: Mary Brooke Billings, Stephen G. Ryan, Han Yan
Institutions: New York University, University of British Columbia
Language: English
Subfield: Finance
Domain: Social Sciences
SDG: Climate action
Open Access status: hybrid
Estimated APC paid: $3,190
OpenAlex ID: W7164909165