Eddy Li, associate professor in finance, and his coauthor, Salman Tahsin from San Jose State University, presented their paper “Wildfire Risk and Access to Credit” at the World Finance Conference in Cyprus and at the Society of Interdisciplinary Business Research 2025 Conference in Tokyo, where it won the Best Paper Award.
Li and Tahsin explain that wildfires pose economic risks by disrupting businesses, lowering home values and increasing loan defaults. Their study reveals that local lenders in wildfire-prone areas implement stricter lending standards, resulting in lower loan approval rates and reduced mortgage access. This effect is more pronounced in regions with high climate change awareness, suggesting that risk perception influences lending decisions. They also highlight that local lenders, who possess superior knowledge of their economics but have limited diversification, tend to be more risk averse. Li and Tahsin emphasize the need for proactive financial strategies to mitigate the long-term effects of wildfires on housing markets and mortgage accessibility.