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

Emilia Garcia-Appendini & Judit Montoriol-Garriga

version abrégée 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.
   
Genre Journal paper
   
mot-clé Trade credit, corporate liquidity, crisis, financial constraints, cash, lines of credit
   
langue English
kind of paper journal article
date de sortie de la publication 7-2013
journal Journal of Financial Economics
maison d'édition Elsevier (Amsterdam)
ISSN 0304-405X
ISSN (online) 1879-2774
DOI 10.1016/j.jfineco.2013.02.010
émission du journal 109
numéro du journal 1
page(s) 272-291
Review Double-Blind Review
   
citation Garcia-Appendini, E., & Montoriol-Garriga, J. (2013). Firms as liquidity providers: Evidence from the 2007-2008 financial crisis. Journal of Financial Economics, 109(1), 272-291, DOI:10.1016/j.jfineco.2013.02.010.