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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 ()
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Felipe Restrepo: Ivey Business School at Western University
Philip E. Strahan: Boston College & NBER

Borradores de Economia from Banco de la Republica de Colombia

Abstract: In 2011, Colombia instituted a tax on repayment of bank loans, thereby increasing the cost of shortterm bank credit more than long-term credit. Firms responded by cutting their short-term loans for liquidity management purposes and increasing their use of cash and trade credit. In industries where 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 offers a substitute source of liquidity that can insulate some firms from bank liquidity shocks. **** RESUMEN: En 2011, Colombia incluyó los desembolsos a terceros dentro de la base gravable a los movimientos financieros (o 4x1000), incrementando así los costos de los créditos de muy corto plazo con relación a los de muy largo plazo. Las firmas respondieron con una disminución en los créditos de corto plazo para solventar problemas de liquidez y con un aumento en el uso del efectivo y las cuentas por pagar. En industrias en donde las cuentas por pagar son más comunes se encuentra una sustitución por las mismas con poco efecto en el efectivo o inversión. Caso contrario a lo observado en industrias con menos uso de las cuentas por pagar. Es así como las cuentas por pagar ofrecen una fuente de liquidez sustituta frente a choques a la provisión de liquidez de los bancos.

Keywords: short-term credit; trade Credit; bank loans; liquidity; difference in differences; crédito de corto plazo; cuentas por pagar; préstamos bancarios; liquidez; diferencias en diferencias. (search for similar items in EconPapers)
JEL-codes: H81 F38 D22 D25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2018-10
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Related works:
Working Paper: Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short-Term Debt (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1056

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