Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt

Felipe Restrepo, Lina Cardona‐sosa and Philip E. Strahan
Authors registered in the RePEc Author Service: Lina Cardona-Sosa

Journal of Finance, 2019, vol. 74, issue 6, 2875-2914

Abstract: In 2011, Colombia instituted a tax on repayment of bank loans, which increased the cost of short‐term bank credit more than long‐term credit. Firms responded by cutting short‐term loans for liquidity management purposes and increasing the use of cash and trade credit. In industries in which trade credit is more accessible (based on U.S. Compustat firms), we find substitution into accounts payable and little effect on cash and investment. Where trade credit is less available, firms increase cash and cut investment. Thus, trade credit provides an alternative source of liquidity that can insulate some firms from bank liquidity shocks.

Date: 2019
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Citations: View citations in EconPapers (14)

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https://doi.org/10.1111/jofi.12832

Related works:
Working Paper: Funding liquidity without banks: evidence from a shock to the cost of very short-term debt (2018)
Working Paper: Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short-Term Debt (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:74:y:2019:i:6:p:2875-2914

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