Recovering after natural disasters: A stabilizing role of the government

This paper explores the patterns of corporate recovery following natural disasters, with a specific focus on the government’s role in facilitating this process. Our results reveal that firms recover fast following disasters in China, with the effect being more pronounced among state-owned enterprises (SOEs). Mechanism analysis identifies the government’s direct and indirect capital injections as the primary drivers of this swift recovery, which help mitigate disruptions in corporate investments. Furthermore, this government intervention exhibits a nuanced nature. Corporate post-disaster recovery tends to be weaker (stronger) for SOEs (Non-SOEs) when local fiscal expenditure is stronger. Different government intervention methods exhibit a substitution effect. Overall, this paper underscores the noteworthy and intricate role of the government in stabilizing the economy.