Campus Units

Finance

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

10-2020

Journal or Book Title

Journal of Finance

DOI

10.2139/ssrn.2963444

Abstract

Unexpectedly severe winter weather, which is arguably exogenous to firm and bank fundamentals, represents a significant cash flow shock for bank-borrowing firms. Firms respond to these shocks by drawing on and increasing the size of their credit lines. Banks charge borrowers for this liquidity via increased interest rates and less borrower-friendly loan provisions. Credit line adjustments occur within one calendar quarter of the shock and persist for at least nine months. Overall, we provide evidence that bank credit lines are an important tool for managing the non-fundamental component of cash flow volatility, especially for solvent small bank borrowers.

Comments

This accepted article is published as Brown, James R. and Gustafson, Matthew and Ivanov, Ivan, Weathering Cash Flow Shocks (September 1, 2020). Journal of Finance, http://dx.doi.org/10.2139/ssrn.2963444.

Rights

Works produced by employees of the U.S. Government as part of their official duties are not copyrighted with in the U.S. The content of this document is not copyrighted.

Language

en

File Format

application/pdf

Published Version

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