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Bank liquidity provision across the firm size distribution

Gabriel Chodorow-Reich, Olivier Darmouni, Stephan Luck and Matthew Plosser

Journal of Financial Economics, 2022, vol. 144, issue 3, 908-932

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.

Keywords: Bank liquidity; Firm size; COVID recession; PPP (search for similar items in EconPapers)
JEL-codes: E44 G21 G32 H32 (search for similar items in EconPapers)
Date: 2022
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Related works:
Working Paper: Bank Liquidity Provision across the Firm Size Distribution (2020) Downloads
Working Paper: Bank Liquidity Provision Across the Firm Size Distribution (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:3:p:908-932

DOI: 10.1016/j.jfineco.2021.06.035

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