Credit Lines and Credit Utilization

Posted: 21 Jun 2004

See all articles by Brent W. Ambrose

Brent W. Ambrose

Pennsylvania State University

Sumit Agarwal

National University of Singapore

Chunlin Liu

University of Rhode Island


While much is known about the characteristics of consumers or businesses that obtain credit lines, relatively little is known empirically about credit line utilization after origination. This study fills that gap by testing two interrelated hypotheses concerning borrower credit quality and credit line utilization. The empirical analysis confirms that borrowers with higher expectations of future credit quality deterioration originate credit lines to preserve financial flexibility. Furthermore, we estimate a competing risks model that confirms our predictions concerning changes in borrower credit line utilization in response to borrower credit quality shocks.

Keywords: Home equity lines, prepayment, banks

JEL Classification: G2, R2, D12

Suggested Citation

Ambrose, Brent W. and Agarwal, Sumit and Liu, Chunlin, Credit Lines and Credit Utilization. Available at SSRN:

Brent W. Ambrose (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802-3306
United States
814-867-0066 (Phone)
814-865-6284 (Fax)

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
8118 9025 (Phone)


Chunlin Liu

University of Rhode Island ( email )

Kingston, RI 02881
United States

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