Natural Disasters and Firm Leasing : Alternative Post-disaster Financing

This paper studies the effect of natural disasters on corporate lease financing. On the one hand, destruction in natural disaster makes firms collateral constrained. On the other hand, disaster-affected firms demand funds for post-disaster reconstruction. Although obtaining external financing is hard under collateral constraints, I find that firms use operating leases to alleviate post-disaster financing needs in the following three years after a natural disaster. Lease financing reverts to a pre-disaster level starting from the fourth year. The paper highlights the importance of operating lease financing for the affected firms in disaster regions