The Elusive Banker: Using Hurricanes to Uncover (Non-)Activity in Offshore Financial Centers

This paper studies active financial service provision in offshore financial centers (OFCs) using hurricane impacts on small islands as a natural experiment. While local conditions, captured by satellite data, deteriorate significantly for nine months after hurricane impacts, international bank activity and investor reactions remain unaffected for OFCs. In contrast, both international funding channels drop substantially for non-OFCs. OFC service provision instead declines during holidays in London, Tokyo, and New York. These results indicate that international regulation attempts requiring local enforcement could be targeted better, that financial risks could be mis-assigned, and raise questions for offshore finance as a development strategy.