Filippo Ippolito

Department of Economics and Business
Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005 Barcelona, Spain
Tel: (+34) 93 542 2578
Fax: (+34) 93 542 1746

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Universitat Pompeu Fabra

NBER Working Papers and Publications

March 2013Credit Lines as Monitored Liquidity Insurance: Theory and Evidence
with Viral V. Acharya, Heitor Almeida, Ander Perez: w18892
We propose and test a theory of corporate liquidity management in which credit lines provided by banks to firms are a form of monitored liquidity insurance. Bank monitoring and resulting credit line revocations help control illiquidity-seeking behavior by firms. Firms with high liquidity risk are likely to use cash rather than credit lines for liquidity management because the cost of monitored liquidity insurance increases with liquidity risk. We exploit a quasi-experiment around the downgrade of General Motors (GM) and Ford in 2005 and find that firms that experienced an exogenous increase in liquidity risk (specifically, firms that relied on bonds for financing in the pre-downgrade period) moved out of credit lines and into cash holdings in the aftermath of the downgrade. We observe a si...

Published: Journal of Financial Economics Volume 112, Issue 3, June 2014, Pages 287–319 Cover image Credit lines as monitored liquidity insurance: Theory and evidence ☆ Viral Acharyaa, b, c, Heitor Almeidac, d, , , Filippo Ippolitob, e, f, Ander Pereze, f citation courtesy of

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