Working Paper: NBER ID: w27945
Authors: Gabriel Chodorow-Reich; Olivier Darmouni; Stephan Luck; Matthew C. Plosser
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.
Keywords: Bank Liquidity; Firm Size; Credit Lines; COVID-19; Paycheck Protection Program
JEL Codes: E51; G21; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firm Size (L25) | Loan Terms (E43) |
| Loan Terms (E43) | Access to Liquidity (G33) |
| Firm Size (L25) | Collateral Requirements (G32) |
| Collateral Requirements (G32) | Utilization Rates (L97) |
| Firm Size (L25) | Drawdown Rates (E43) |
| COVID-19 Recession (F44) | Drawdown Rates (E43) |
| PPP (H69) | Non-PPP Bank Borrowing (G21) |