Do typhoon storm surges affect bank performance in coastal regions? Empirical evidence from China

Typhoon storm surges cause significant damage to economic activities and have a huge impact on the financial sector. Using panel data of 170 local commercial banks in China's coastal regions from 2008 to 2022, this study explores the impact of typhoon storm surges on bank performance. The study finds that typhoon storm surges significantly reduce bank performance, with a greater impact on banks in the southern and eastern marine economic circles, as well as those primarily serving rural and “Tam Nong” economies. Typhoon storm surges affect bank performance by causing economic losses to bank's credit clients, influencing the probability of default and the quality of bank credit assets. Improving coastal infrastructure, increasing insurance coverage, and ensuring bank capital adequacy are all conducive to mitigating the negative impact of typhoons. The conclusion provides new empirical evidence for preventing and extricating marine disasters and bank climate risks in coastal regions. •Investigating the impact and mechanisms of typhoon storm surges on bank performance.•Using the wind field model to quantify typhoon destructiveness index in coastal areas of China.•Typhoon storm surges increase the loan default risk, reducing bank performance.•Coastal infrastructure, insurance, and bank capital management play moderating roles.