Remembering the Trembles of Nature : How Do Long-Run Disaster Experiences Shape Bank Risk Taking?

This paper examines the impact of long-run earthquake experiences on banks’ business practices. Using earthquake and bank branch data for California, we find that banks that have had more intense experiences change their business practices: they have a smaller exposure to real estate and maintain higher equity levels. We discuss whether these changes are driven by institutional memory or local markets’ economic conditions banks operate in. Our results demonstrate that for institutions, more so than for individuals, sizable shocks from long ago can still influence current financial decisions