Bank liquidity provision across the firm size distribution

By Gabriel Chodorow-reich, Olivier Darmouni, Stephan Luck, Matthew C. Plosser. Journal of Financial Economics, 2020

198 citations recorded by the source corpus.

Abstract We use supervisory loan-level data to document that small firms (SMEs) obtain shorter maturity credit lines than large firms, post more collateral, have higher utilization rates, and pay higher spreads. We rationalize these facts as the equilibrium outcome of a trade-off between lender commitment and discretion. Using the COVID recession, we test the prediction that SMEs are subject to greater lender discretion. Consistent with this hypothesis, SMEs did not draw down whereas large firms did, even in response to similar demand shocks. PPP recipients reduced non-PPP loan balances, indicating the program bolstered their liquidity and alleviated the shortfall.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/cb56a323a4370338867df03e236d4ec65eea89e3

Citations in the corpus

When Selling Becomes Viral: Disruptions in Debt Markets in the COVID-19 Crisis and the Fed’s Response (2020, unknown): “Chodorow-Reich et al. (2020), Fahlenbrach, Rageth, and Stulz (2021), and Greenwald, Krainer, and Paul (2020) analyze the expansion of corporate borrowing because of firms’ demand for liquidity during the COVID19 crisis.”
Did the paycheck protection program hit the target? (2020, unknown): “…of the program in supporting liquidity for ﬁrms of different size, and how the distribution of funds varied with businesses’ ability to work remotely ( Erel and Liebersohn, 2020; Cororaton and Rosen, 2020; Papanikolaou and Schmidt, 2020; Morse and Bartlett, 2020; Chodorow-Reich et al., 2020 ).”
The impact of COVID-19 pandemic on bank lending around the world (2021, unknown): “(2020), Chodorow-Reich et al. (2020), and Greenwald et al. (2020) document important heterogeneities across loan types and corporate borrowers, with differences becoming more stark”