Abstract
We find that Chinese regional state-owned City-Commercial Banks (CCBs) landlocked by their remit to operate within a city respond to natural disasters more effectively by aggressively expanding credit, especially to corporate borrowers. The credit expansion is more remarkable in CCBs with high state ownership and those that are private. However, the additional lending does not sacrifice asset quality. Moreover, using satellite-based city night lights, we find post-disaster cities that experience greater CCB credit expansion enjoy stronger economic recovery. Overall, our findings highlight the critical role played by regional state-owned lenders in economic recovery from increasingly frequent natural disasters.
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