Bank Liquidity Provision Across the Firm Size Distribution

Gabriel Chodorow-Reich · Olivier Darmouni · Stephan Luck · Matthew C. Plosser

49 citations0/0 files storedNational Bureau of Economic Research

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Banking stability, regulation, efficiency Monetary Policy and Economic Impact Corporate Finance and Governance

Abstract

We use supervisory loan-level data to document that small firms (SMEs) obtain shorter maturity credit lines than large firms; have less active maturity management; post more collateral; have higher utilization rates; and pay higher spreads.We rationalize these facts as the equilibrium outcome of a trade-off between lender commitment and discretion.Using the COVID recession, we test the prediction that SMEs are subject to greater lender discretion by examining credit line utilization.We show that SMEs do not drawdown in contrast to large firms despite SME demand, but that PPP loans helped alleviate the shortfall.

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References

1981Credit Rationing in Markets with Imperfect Information 1994The Benefits of Lending Relationships: Evidence from Small Business Data 2006Financial Constraints Risk 1995Relationship Lending and Lines of Credit in Small Firm Finance 2009Bank lending during the financial crisis of 2008 1994Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms 2002Information Production and Capital Allocation: Decentralized versus Hierarchical Firms 1992An Incomplete Contracts Approach to Financial Contracting

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