Research
Working Papers
Natural hazards, community disaster resilience, and household credit
The increasing frequency and severity of natural disasters necessitate a better understanding and mitigation of their impact on household credit availability. This paper first proposes that the resilience of communities — hence their ability to respond to and recover from natural disasters — is reflected in borrowers’ creditworthiness post-disasters; it then explores whether community resilience mitigates frictions in transaction lending. Utilizing novel loan-level data on car loans and a constructed local resilience measure, I find that after a catastrophic flooding event, loan rates increase and loan originations decrease for low-income borrowers. Resilience mitigates this, narrowing pricing gaps between high- and low-income borrowers and enhancing credit access for those most affected by credit constraints following uncertainty shocks.
Too-big-to-strand? Bond versus bank financing in the transition to a low-carbon economy (with Manthos Delis, Kathrin de Greiff and Steven Ongena)
What is the role market- and bank-based debt play in the climate transition process? We present evidence that bond markets price the risk that assets held by fossil fuel firms strand, while banks in the syndicated loan market seemingly do not price this risk much. Consequently, to fulfill their financing needs fossil fuel firms increasingly rely less on bonds and more on loans. We can interpret the within-firm bond-to-loan substitution along stranding risk as a contraction in the supply of bond versus bank funding. Within the banking sector especially the big banks are willing to provide cheaper and more financing to fossil fuel firms.
Presented at the German Council of Economic Experts (e-Berlin), the 2021 Bank of Japan International Research Workshop on Climate-Related Financial Risks (e-Tokyo), the 2021 third Endless Summer Conference on Financial Intermediation and Corporate Finance (e-Glyfada).
Do lenders price the brown factor in car loans? Evidence from diesel cars (with Matteo Falagiarda, Steven Ongena, and Alessandro Scopelliti)
The transition to a green economy strongly depends on the existence of appropriate economic incentives for agents. The loan market for car purchases is a paradigmatic example in this respect, as lenders may set credit conditions which may discourage or support the purchase of high-emission vehicles. Using car loan-level data we study whether banks adjust their lending terms and conditions in response to different shocks to the perceived environmental quality of diesel vehicles. Focusing on the impact of the diesel emissions scandal in the automobile sector in 2015 and on local policy changes regarding circulation restrictions due to air pollution, we find that bank lending particularly by captive banks may further reinforce the market and regulatory failures that led to extensive levels of pollution by the automobile sector.
Presented at 5th Annual GRASFI Conference (Zurich, 2022); Frontiers of climate and nature in macroeconomics and finance (Banque de France, Paris, 2022); Sustainable Finance Research Forum (IPAG Business School, Paris, 2022), “Climate change and the financial system: Challenges and opportunities for central banks (Sustainable Finance Lab and Sveriges Riksbank, Stockholm 2023), Swiss Winter Conference on Financial Intermediation (Gerzensee, 2023).
Awards: Best paper at the 2022 Sustainable Finance Forum (IPAG, Paris), Best paper at Essex Finance Centre (EFiC) 2023 Conference in Banking and Corporate Finance
Publications
Beyene, Winta, Manthos D. Delis and Steven Ongena, 2022, Disclosure of bank fossil fuel exposures, European Economy – Banks, Regulation, and the Real Sector, 21-02, 89-103.