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.
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.
Copyright Date
2020
Language
en
File Format
application/pdf
Recommended Citation
Brown, James R.; Gustafson, Matthew; and Ivanov, Ivan, "Weathering Cash Flow Shocks" (2020). Finance Publication. 28.
https://lib.dr.iastate.edu/finance_pubs/28
Included in
Business Administration, Management, and Operations Commons, Corporate Finance Commons, Finance and Financial Management Commons, Nonprofit Administration and Management Commons, Organizational Behavior and Theory Commons
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.