Federal Reserve Bank of NY
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New York, NY 10045
Institutional Affiliation: Federal Reserve Bank of NY
NBER Working Papers and Publications
|September 2016||Firms’ Management of Infrequent Shocks|
with Benjamin L. Collier, Andrew F. Haughwout, Howard C. Kunreuther, Erwann O. Michel-Kerjan: w22612
We examine businesses’ financial management of a rare, severe event using detailed firm-level data collected following Hurricane Sandy in the New York area. Credit played a prominent role in financing recovery; more negatively affected firms took on debt because of Sandy (38%) than received insurance payments (15%) in our data. Negatively affected firms were often credit constrained after the shock. While firms’ demand for insurance is often explained by financing frictions, we find that the most credit constrained firms after the event, younger firms and smaller firms, were the least likely to insure before it.