With this paper Luca Santabarbara and Ilaria Manti co-won the 11th edition of the EACB Award for Young Researchers on Co-operative Banks.
Abstract
This paper analyses the differences between local and commercial banks, focusing on credit supply in the aftermath of a natural disaster. Using the earthquake that hit Northern Italy in 2012 as exogenous shock, in the first part of the analysis, the study relies on a diff-in-diff approach. We show that cooperative banks, differently from commercial banks, do not interrupt the credit channel, hence supporting the economic recovery of the territory. To support these findings, we also perform panel estimation, using additional explanatory variables, such as: personal income, bank deposits, and bank branches. Results are coherent with the diff-in-diff approach, suggesting local banks increased credit supply (i.e., recovery lending) in the territories affected by the earthquake, while there is no evidence in this sense for commercial banks.