When Hurricane Katrina struck the USA in 2005, nearly 2000 people lost their lives and the cost of the catastrophe exceeded $100 billion. Now, 21 years later, new research from The University of Manchester has found that Katrina left another, less visible legacy long after the storm clouds had cleared.
The study, published in the Journal of Corporate Finance, has revealed that in the months and years after Katrina, many businesses in affected areas began paying their suppliers later than usual. These delays had real consequences - fewer jobs, more business closures and financial stress spreading from one company to the next.
Using detailed data on individual business locations across the Gulf Coast region of the USA, Professor Viet Dang, Professor Ning Gao and Dr Hongge Lin from Alliance Manchester Business School tracked how payment behaviour changed after Katrina. They focused on whether companies paid their bills on time - something that matters deeply to suppliers operating in competitive markets who rely on steady payments to cover wages, rent and materials.
The results were notable - businesses located in counties hit hardest by Katrina were significantly more likely to delay payments to their suppliers. On average, payment reliability fell by more than four percent, which may not sound dramatic, but delays of this magnitude can tip the balance for businesses with tight margins and weekly payrolls.
Companies that delayed payments were more likely to cut jobs or shut down entirely. Their suppliers - often businesses located far from the hurricane zone - also suffered, reporting weaker cash flow and poorer financial health. In other words, a storm in Louisiana could hurt a supplier in another state, simply because money arrived late.
The findings highlight payment delays within supply chains as a key cause of Katrina's widespread and lasting economic footprint. They also underscore the importance of corporate financial management across the supply chain.
"In a fast-moving economy, companies must manage their cash flows effectively," said Professor Gao. "Punctual payment not only enables companies to meet their bill-payment obligations but also directly affects their credit scores and borrowing capacity, as suppliers and lenders closely monitor payment behaviour to assess financial health."
The lessons are especially relevant today. Extreme weather events are becoming more frequent and more severe, from hurricanes along the US coast to wildfires and floods elsewhere. Modern businesses are deeply interconnected, meaning that disruption in one place can quickly spread to many others, affecting even workers and communities that never experienced the events directly.
"Faster access to emergency funding, more resilient supply chains and better disaster planning could help prevent payment delays from turning into job losses and business failures."
DOI: https://doi.org/10.1016/j.jcorpfin.2026.102964
