ABSTRACT This paper examines whether U.S. banks learn from natural disasters. We explore several potential channels of adjustment and find that exposed banks primarily respond by adopting precautionary capital measures. This behaviour is evident both in the long run, when assessing divergent trends in the evolution of equity over time, and in the short run following realised shocks. The results are driven by small banks with assets up to 1 billion USD and are robust across geographically diverse regions of the United States. Overall, these findings provide valuable insights into how banks adapt to increasingly severe climate‐related shocks.
Dreusch et al. (Mon,) studied this question.