Does Frugality Influence Firm Behavior? Evidence from Natural Disasters

Abstract

Across 42 countries, I show that nonfinancial firms in more frugal countries tend to have shorter debt maturity, and when large natural disasters occur, they raise debt with a much shorter maturity structure and smaller amounts of equity. Additionally, firms in more frugal countries are more likely to tap global capital markets the year after the disasters, not before. Lastly, while firms in thriftier countries reduce corporate investments at higher rates when disasters occur, those that have foreign assets and foreign income do not, as would be expected if residents’ frugality can intensify frictions on firms’ local capital supply.