Bank Liquidity Provision Across the Firm Size Distribution

82 Pages Posted: 14 Oct 2020 Last revised: 19 Nov 2021

See all articles by Gabriel Chodorow-Reich

Gabriel Chodorow-Reich

Harvard University Department of Economics

Olivier Darmouni

Columbia University - Columbia Business School

Stephan Luck

Federal Reserve Bank of New York

Matthew C. Plosser

Federal Reserve Banks - Federal Reserve Bank of New York

Multiple version iconThere are 3 versions of this paper

Date Written: October 2020

Abstract

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.

Suggested Citation

Chodorow-Reich, Gabriel and Darmouni, Olivier and Luck, Stephan and Plosser, Matthew C., Bank Liquidity Provision Across the Firm Size Distribution (October 2020). NBER Working Paper No. w27945, Available at SSRN: https://ssrn.com/abstract=3709636

Gabriel Chodorow-Reich (Contact Author)

Harvard University Department of Economics ( email )

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Olivier Darmouni

Columbia University - Columbia Business School ( email )

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New York, NY 10027
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Stephan Luck

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Matthew C. Plosser

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

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