This paper explores how banks adjust their risk-based capital ratios and asset allocations following an exogenous shock to their asset quality caused by Hurricane Katrina in 2005. We find that independent banks based in the disaster areas increase their risk-based capital ratios after the...

The instability of banks during the recent financial crisis underlines the importance of understanding how banks determine their capital ratios. This paper conducts the first empirical assessment on how banks adjust their capital ratios following an exogenous shock to their asset risks. The...

The instability of banks during the recent financial crisis underlines the importance of understanding how banks determine their capital ratios. This paper conducts the first empirical assessment on how banks adjust their capital ratios following an exogenous shock to their asset risks. The...

This paper explores how banks react to an exogenous shock caused by Hurricane Katrina in 2005, and how the structure of the banking system affects economic development following the shock. Independent banks based in the disaster areas increase their risk-based capital ratios after the hurricane,...