Bank Liquidity Provision Across the Firm Size Distribution

Gabriel Chodorow-Reich, Olivier Darmouni, Stephan Luck, Matthew C. Plosser

NBER Working Paper No. 27945
Issued in October 2020, Revised in December 2020
NBER Program(s):Corporate Finance, Economic Fluctuations and Growth, Monetary Economics

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.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w27945