Accounting for natural disasters: The impact of earthquake risk on California municipal bond pricing

Jacob Fowles, Gao Liu, Cezar Brian Mamaril

Research output: Contribution to journalArticle

Abstract

While Katrina has raised awareness of the potential impact of hurricanes on municipalities along the Gulf Coast, it remains unclear if the municipal bond market considers other types of natural disaster risk in other areas. We attempt to fill this gap by conducting an analysis to determine if underlying geologic earthquake risk affects interest costs for municipal bond issuers in California. We find that earthquake risk does matter in determining the interest costs for municipalities issuing debt, but not universally - only for municipal bonds issued after Hurricane Katrina and only in relation to underlying geologic earthquake risk.

Original languageEnglish (US)
Pages (from-to)68-83
Number of pages16
JournalPublic Budgeting and Finance
Volume29
Issue number1
DOIs
StatePublished - 2009
Externally publishedYes

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

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