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

No 23179, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In 2011, Colombia instituted a tax on repayment of bank loans, thereby increasing the cost of short-term 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.

JEL-codes: G21 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-ban
Note: CF
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Published as FELIPE RESTREPO & LINA CARDONA‐SOSA & PHILIP E. STRAHAN, 2019. "Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt," The Journal of Finance, vol 74(6), pages 2875-2914.

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Related works:
Journal Article: Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt (2019)
Working Paper: Funding liquidity without banks: evidence from a shock to the cost of very short-term debt (2018)
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