Aggregate risk and the choice between cash and lines of credit / Viral V. Acharya, Heitor Almeida, Murillo Campello.
| Author/creator | Acharya, Viral V. |
| Other author | Almeida, Heitor. |
| Other author | Campello, Murillo. |
| Other author | National Bureau of Economic Research. |
| Format | Electronic |
| Publication Info | Cambridge, MA : National Bureau of Economic Research, |
| Supplemental Content | Full text available from NBER Working Papers |
| Series | NBER working paper series ; working paper 16122 Working paper series (National Bureau of Economic Research : Online) ; working paper no. 16122. UNAUTHORIZED |
| Summary | "We argue that a firm's aggregate risk is a key determinant of whether it manages its future liquidity needs through cash reserves or bank lines of credit. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result, firms with high aggregate risk find it costly to get credit lines from banks and opt for cash reserves in spite of higher opportunity costs and liquidity premium. We verify our model's hypothesis empirically by showing that firms with high asset beta have a higher ratio of cash reserves to lines of credit, controlling for other determinants of liquidity policy. This effect of asset beta on liquidity management is economically significant, especially for financially constrained firms; is robust to variation in the proxies for firms' exposure to aggregate risk and availability of credit lines; works at the firm level as well as the industry level; and is significantly stronger in times when aggregate risk is high. Consistent with the channel that drives these effects in our model, we find that firms with high asset beta face higher spreads on bank credit lines"--National Bureau of Economic Research web site. |
| General note | Title from PDF file as viewed on 7/13/2010. |
| Bibliography note | Includes bibliographical references. |
| Access restriction | Available only to authorized users. |
| Other forms | Also available in print. |
| Technical details | Mode of access: World Wide Web |
| Genre/form | Electronic books. |
| LCCN | 2010656182 |
Availability
| Library | Location | Call Number | Status | Item Actions |
|---|---|---|---|---|
| Electronic Resources | Access Content Online | ✔ Available |