Firms as liquidity providers: Evidence from the 2007–2008 financial crisis

Emilia Garcia-Appendini and Judit Montoriol-Garriga
Authors registered in the RePEc Author Service: Judit Montoriol Garriga ()

Journal of Financial Economics, 2013, vol. 109, issue 1, 272-291

Abstract: Using a supplier–client matched sample, we study the effect of the 2007–2008 financial crisis on between-firm liquidity provision. Consistent with a causal effect of a negative shock to bank credit, we find that firms with high precrisis liquidity levels increased the trade credit extended to other corporations and subsequently experienced better performance as compared with ex ante cash-poor firms. Trade credit taken by constrained firms increased during this period. These findings are consistent with firms providing liquidity insurance to their clients when bank credit is scarce and offer an important precautionary savings motive for accumulating cash reserves.

Keywords: Trade credit; Corporate liquidity; Crisis; Financial constraints; Liquidity (search for similar items in EconPapers)
JEL-codes: G01 G30 G32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (160)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X13000536
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:jfinec:v:109:y:2013:i:1:p:272-291

DOI: 10.1016/j.jfineco.2013.02.010

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().