A large creditor in contagious liquidity crises

Frederick Dongchuhl Oh and Junghum Park

Journal of Banking & Finance, 2023, vol. 146, issue C

Abstract: This paper presents a contagious liquidity crises model for nonfinancial firms in which a large creditor influences the extent to which the contagion spreads across firms. We consider a sequential framework where two rollover games occur one after another. A liquidity crisis in one firm triggers a liquidity crisis in another firm through changes in the risk attitudes of creditors from the wealth effect. We show that the presence of a large creditor with a sufficient asset size reduces the contagion effect. Moreover, a concentration of a large creditor’s loan portfolio towards the former firm increases the contagion effect. (JEL G01, G33, D82, D83).

Keywords: Contagion; Large creditor; Liquidity crisis; Global game; Wealth effect; Coordination failure (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426622002862
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:146:y:2023:i:c:s0378426622002862

DOI: 10.1016/j.jbankfin.2022.106706

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().