RFS Advance Access originally published online on August 18, 2009
Review of Financial Studies 2009 22(12):5069-5098; doi:10.1093/rfs/hhp061
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Empirical Analysis of Corporate Credit Lines
Banco de España
Federal Reserve Bank of San Francisco
Banco de España
Send correspondence to Jose A. Lopez, Economic Research Department, Federal Reserve Bank of San Francisco, 101 Market Street, MS1130, San Francisco, CA 94105-1530; telephone: 415-977-3894. E-mail: jose.a.lopez{at}sf.frb.org.
JEL Classification: E32, G18, M21
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Abstract |
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Since bank credit lines are a major source of corporate funding, we examine the determinants of their usage with a comprehensive database of Spanish corporate credit lines. A line's default status is a key factor driving its usage, which increases as firm financial conditions worsen. Firms with prior defaults access their credit lines less, suggesting that bank monitoring influences firms’ usage decisions. Line usage has an aging effect that causes it to decrease by roughly 10% per year of its life. Lender characteristics, such as the length of a firm's banking relationships, as well as macroeconomic conditions, affect usage decisions.
We gratefully acknowledge the comments of Michael Weisbach (the Editor) and an anonymous referee as well as Mark Carey, Ethan Cohen Cole, Adolfo Corrales, Hans Degryse, Kimberly DeTrask, Antonella Foglia, Jan-Pieter Krahnen, Jorge Pérez, Rafael Repullo, Andrea Resti, Til Schuermann, Phil Strahan, Rob Valletta, Dan Wilson, and seminar participants at the FDIC's Center for Financial Research Sixth Annual Bank Research Conference, the 2006 GRETA C.R.E.D.I.T. conference, Moody's KMV, the Federal Reserve Banks of New York and San Francisco, and the 2007 Applied Banking Workshop of the Basel Committee on Banking Supervision. The views expressed here are solely those of the authors and should not be interpreted as reflecting the views of the Banco de España, the Eurosystem, the Federal Reserve Bank of San Francisco, or the Board of Governors of the Federal Reserve System.