Bank Liquidity Provision Across the Firm Size Distribution
81 Pages Posted: 11 Oct 2020 Last revised: 23 Dec 2020
Date Written: October 1, 2020
We use supervisory loan-level data to document that small firms (SMEs) obtain shorter maturity credit lines than large firms; have less active maturity management; post more collateral; have higher utilization rates; and pay higher spreads. We rationalize these facts as the equilibrium outcome of a trade-off between lender commitment and discretion. Using the COVID recession, we test the prediction that SMEs are subject to greater lender discretion by examining credit line utilization. We show that SMEs do not drawdown in contrast to large firms despite SME demand, but that PPP loans helped alleviate the shortfall.
Keywords: Liquidity Provision, Macro-Finance, Credit, Financial Constraints, Loan Terms, Banking, Credit Lines, COVID-19
JEL Classification: G00, G20, G30
Suggested Citation: Suggested Citation