CEF.UP – WiP Seminar/Webinar

Tuesday – December 6^th, 2022 at 1:00 p.m. | Room 305 | Online

“Firm Investment and Liquidity: Evidence from a Natural Disaster”

José Jorge – FEP and Cef.up (joint work with Sujiao Zhao)

Abstract:

“Natural disasters dramatically affect firms, but they also provide for an opportunity to start anew. We exploit information on the 15-16 October 2017 Portuguese wildfires and the ensuing official assistance that subsidized 85% of the losses, applying a differences-in-differences approach. Firms affected by the wildfires increase output and fixed assets, with employment and productivity remaining stable. Their book value of fixed assets increases substantially more than their economic value. Affected firms activate their existing credit lines, borrow long term credit, and increase cash holdings. The evidence is consistent with the theory that firms invest both in scale and in liquidity.”