Earthquakes and Market Capitalization: A Historical Perspective Using Panel Data

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Article has been peer-reviewed and accepted for publication, but has not yet been published. Titles, authors, abstracts and keywords may change before publication.


market capitalisation; earthquakes damage; cross-country

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InsiderScience Publishers


We test if earthquakes could create market value as companies invest to recover. Using a large firm-level data set spanning 299 earthquakes, in 15 years, in over 50 countries, we find evidence consistent with the creative destruction hypothesis. However, a closer look shows that earthquakes create value for firms in less developed countries (non-G8) while destroying value in developed countries (G8). We interpret this as a sign that innovation can be easier in poorer countries where the economies of scale of adopting new technologies are bigger. We also report a magnitude effect: large earthquakes tend to increase firm value while smaller earthquakes are associated with value destruction. We posit that large earthquakes trigger large corporate responses that increase productivity while smaller earthquakes are dealt with temporary measures. Finally, we report new moderators of the positive impact: multinationality of the firm, a country’s disaster preparedness and a country’s non-life insurance consumption