The use of bank lines of credit in corporate liquidity management: A review of empirical evidence |
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Authors: | Cem Demiroglu |
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Institution: | a College of Administrative Sciences and Economics, Koc University, Sariyer, Istanbul 34580, Turkey b Warrington College of Business, University of Florida, Gainesville, FL 32611-7168, United States |
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Abstract: | This paper reviews empirical evidence on the use of bank lines of credit as a source of corporate liquidity. Traditional explanation for lines of credit is that they provide insurance against liquidity shocks, in much the same as way hoarding cash does. However, recent empirical research suggests that access to lines of credit is contingent on the credit quality of the borrower as well as the financial condition of the lender. These findings suggest that lines of credit are an imperfect substitute for cash as a source of corporate liquidity. |
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Keywords: | G30 G31 G32 G2 |
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