The use of bank lines of credit in corporate liquidity management: A review of empirical evidence

Demiroglu, Cem; James, Christopher M.

doi:10.1016/j.jbankfin.2010.10.020

Cited by 82 publications

(33 citation statements)

References 60 publications

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“…Several recent papers on corporate liquidity management have examined the extent to which cash and lines of credit are substitutable sources of liquidity (for a review of this literature, see Demiroglu and James 2011). For example, Campello et al (2009) find, based on survey evidence, that private but not public firms had difficulty accessing and using their credit lines during the recent credit crisis, which suggests that lines of credit are a more contingent source of liquidity for private firms.…”

Section: Resultsmentioning

confidence: 99%

Bank Lending Standards and Access to Lines of Credit

Demiroglu

James

Kizilaslan

2012

J of Money Credit Banking

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This paper examines how changes in bank lending standards are related to the availability of bank lines of credit for private and comparable public firms. Overall, we find that access to lines of credit is more contingent on bank lending standards for private than for public firms. The impact of bank lending standards is however asymmetric: while private firms are less likely than public firms to gain access to new lines when credit market conditions are tight, we find no difference between public and private firms in terms of their use or retention of pre‐existing lines. We also find that private firms without lines of credit use more trade credit when bank lending standards are tight, which is suggestive of a supply effect. Overall, the evidence suggests that “credit crunches” are likely to have a disproportionate impact on private firms. However, pre‐existing banking relationships appear to mitigate the impact of these contractions on private firms.

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Section: Resultsmentioning

confidence: 99%

Bank Lending Standards and Access to Lines of Credit

Demiroglu

James

Kizilaslan

2012

J of Money Credit Banking

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“…(). For a survey on the use of bank credit line by nonfinancial firms to manage liquidity, see Demiroglu and James ().…”

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confidence: 99%

Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt

Restrepo¹,

Cardona-Sosa²,

Strahan

2019

The Journal of Finance

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In 2011, Colombia instituted a tax on repayment of bank loans, which increased the cost of short‐term bank credit more than long‐term credit. Firms responded by cutting short‐term loans for liquidity management purposes and increasing the use of cash and trade credit. In industries in which 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 provides an alternative source of liquidity that can insulate some firms from bank liquidity shocks.

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“…The dynamic interrelations between credit scoring (borrower's quality) and credit line facilities (bank loan financing) are now empirically investigated (Demiroglu and James 2011). The discussion focuses on the implications of credit quality shifts, as depicted in the corresponding credit grading (borrower upgrades/downgrades), inducing respective credit line financing adjustments in the bank loan portfolio (Barry, Escalante, and Ellinger 2002).…”

Section: Implications Of Credit Rating Shifts For Bank Loan Facilitiesmentioning

confidence: 99%

An integrated credit rating and loan quality model: application to bank shipping finance

Gavalas

Syriopoulos

2014

Maritime Policy & Management

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The use of bank lines of credit in corporate liquidity management: A review of empirical evidence

Cited by 82 publications

References 60 publications

Bank Lending Standards and Access to Lines of Credit

Bank Lending Standards and Access to Lines of Credit

Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt

An integrated credit rating and loan quality model: application to bank shipping finance

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