Banking on Snow: Bank Capital, Risk, and Employment

Baumgartner, Simon; Stomper, Alex; Schober, Thomas and Winter-Ebmer, RudolfORCID: https://orcid.org/0000-0001-8157-6631 (August 2022) Banking on Snow: Bank Capital, Risk, and Employment. IHS Working Paper Series 43, 65 p.

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Abstract

How does small-firm employment respond to exogenous labor productivity risk? We find that this depends on the capitalization of firms’ local banks. The evidence comes from firms offering (quasi-) fixed employment to workers whose productivity depends on the weather. Weather risk reduces this employment, and the effect is stronger in regions where the regional banks have less equity capital. Bank capitalization also proxies for the extent to which the regional banks’ borrowers can obtain liquidity when the regions are hit by weather shocks. We argue that, as liquidity providers, well-capitalized banks support economic adaptation to climate change.

Item Type:	IHS Series
Research Units:	European Governance, Public Finance and Labor Markets IHS general publications
Date Deposited:	20 Oct 2022 13:28
Last Modified:	14 Jun 2024 11:00
URI:	https://irihs.ihs.ac.at/id/eprint/6298

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