Informal and Formal Financial Resources and Small Business Resilience to Disasters

The following article examines the impact of Hurricane Katrina on small business success and adaptation. Small business success is characterized as increased revenues when compared to pre-disaster levels. Adaptation is characterized as post-Katrina changes to business infrastructure. A multivariate probit with sample selection allows the empirical analysis to account for the simultaneity of changes in revenue and adaptation and also sample selection bias introduced through business demise. The results suggest the importance of pre-disaster mitigation and adaptation activities as well as the effectiveness of formal financial resources in supporting adaptation. Informal financial resources are found to be largely ineffective.