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

Item Type Journal paper
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 pre-crisis liquidity levels increased the trade credit extended to other corporations and subsequently experienced better performance as compared to 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 provide an important precautionary savings motive for accumulating cash reserves.
Authors García-Appendini, Emilia & Montoriol-Garriga, Judit
Journal or Publication Title Journal of Financial Economics
Language English
Keywords Trade credit, corporate liquidity, crisis, financial constraints, cash, lines of credit
Subjects economics
HSG Classification not classified
Refereed Yes
Date July 2013
Publisher Elsevier
Place of Publication Amsterdam
Volume 109
Number 1
Page Range 272-291
Number of Pages 20
ISSN 0304-405X
ISSN-Digital 1879-2774
Publisher DOI
Depositing User Prof. PhD Emilia García-Appendini
Date Deposited 10 Oct 2012 18:18
Last Modified 23 Aug 2016 11:14



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García-Appendini, Emilia & Montoriol-Garriga, Judit (2013) Firms as liquidity providers: Evidence from the 2007-2008 financial crisis. Journal of Financial Economics, 109 (1). 272-291. ISSN 0304-405X

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