I document a line of credit channel through which bank liquidity supply shocks affected corporate investment during the 2008–2009 financial crisis. By exploiting the predetermined variation in the maturity structure of lines of credit, I find that firms whose last pre-crisis lines of credit became due at the time of the crisis (treated firms) cut investment by more than similar firms whose lines of credit were scheduled to mature after the crisis. Moreover, this effect is stronger for financially constrained firms, bank-dependent firms, and firms whose pre-crisis banks were unhealthy. Within the treated group, firms with unhealthy banks were less likely to obtain lines of credit in the crisis than those with healthy banks. Finally, in the sample of firms with lines of credit before the crisis, I find that those with unhealthy banks experienced lower growth in lines of credit and investment, but this effect is restricted only to unrated firms.
University of Minnesota Ph.D. dissertation. August 2019. Major: Business Administration. Advisor: Andrew Winton. 1 computer file (PDF); vi, 54 pages.
Bank Liquidity Supply and Corporate Investment during the 2008–2009 Financial Crisis.
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