Sources of Funding in a Crisis: Evidence from Investment Banks

48 Pages Posted: 21 Mar 2013 Last revised: 22 Dec 2017

Date Written: December 21, 2017


We evaluate changes in investment bank balance sheets during financial crises to determine how these firms respond to funding shocks. Most investment banks maintain funding levels during these downturns, suggesting that liquidity shocks are not a trigger for their financial troubles. Among the banks that do face funding shortfalls, we find evidence from Level 3 assets that the decline in debt financing arises from concerns about default risk and uncertainty regarding losses on previous investments. Rather than selling toxic assets at fire sale prices in response to funding declines, investment banks more often rely on cherry picking of assets and, more recently, deposits.

Keywords: Liquidity shocks, investment banks, funding shocks, credit risk, fire sales, financial crisis, financial constraints, Level 3 assets

JEL Classification: G21, G24, G28, G32, G33, E44, E58, E61

Suggested Citation

Helwege, Jean and Jindra, Jan, Sources of Funding in a Crisis: Evidence from Investment Banks (December 21, 2017). Available at SSRN: or

Jean Helwege

UC Riverside ( email )

900 University Ave.
Anderson Hall
Riverside, CA 92521
United States
9518274284 (Phone)

No contact information is available for Jan Jindra

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics