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Natural disasters and firm leasing: A collateral channel

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  • Wang, Jiawei (Brooke)

Abstract

This paper studies the role of lease financing in disaster-affected firms under collateral constraints. Disaster-affected firms demand funds for post-disaster reconstruction. However, the destruction of natural disasters leads to collateral constraints, which create external financing frictions. I find that affected firms obtain financing through operating leases after natural disasters. The significance of the findings highlights the importance of operating leases for collateral-constrained firms.

Suggested Citation

  • Wang, Jiawei (Brooke), 2023. "Natural disasters and firm leasing: A collateral channel," Journal of Corporate Finance, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:corfin:v:82:y:2023:i:c:s0929119923000779
    DOI: 10.1016/j.jcorpfin.2023.102428
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    References listed on IDEAS

    as
    1. Shaojin Li & Toni M. Whited & Yufeng Wu, 2016. "Collateral, Taxes, and Leverage," The Review of Financial Studies, Society for Financial Studies, vol. 29(6), pages 1453-1500.
    2. Amine Ouazad & Matthew E Kahn, 2022. "Mortgage Finance and Climate Change: Securitization Dynamics in the Aftermath of Natural Disasters," The Review of Financial Studies, Society for Financial Studies, vol. 35(8), pages 3617-3665.
    3. Toni M. Whited & Guojun Wu, 2006. "Financial Constraints Risk," The Review of Financial Studies, Society for Financial Studies, vol. 19(2), pages 531-559.
    4. Andrea L. Eisfeldt & Adriano A. Rampini, 2009. "Leasing, Ability to Repossess, and Debt Capacity," The Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1621-1657, April.
    5. Yongqiang Chu, 2020. "Collateral, Ease of Repossession, and Leases: Evidence from Antirecharacterization Laws," Management Science, INFORMS, vol. 66(7), pages 2951-2974, July.
    6. Sudheer Chava, 2014. "Environmental Externalities and Cost of Capital," Management Science, INFORMS, vol. 60(9), pages 2223-2247, September.
    7. Charles J. Hadlock & Joshua R. Pierce, 2010. "New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 1909-1940.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Natural disasters; Leasing; Collateral constraints; Financing frictions;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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