Firm Exit and Liquidity: Evidence from the Great Recession

Fernando Leibovici and David Wiczer

No 74, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms with more access to credit. This difference widened substantially in the Great Recession while, in contrast, default rates did not vary much by size, age, or productivity. We identify conditions under which standard models of firms subject to financial frictions can be consistent with these facts.

Keywords: Firm exit; Great Recession; Credit constraints; Financial distress (search for similar items in EconPapers)
JEL-codes: E32 G01 (search for similar items in EconPapers)
Date: 2023-06-01
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-ent and nep-sbm
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Related works:
Working Paper: Firm Exit and Liquidity: Evidence from the Great Recession (2024)
Working Paper: Firm Exit and Liquidity: Evidence from the Great Recession (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:96367

DOI: 10.21034/iwp.74

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