Gourinchas, Pierre-Olivier; Kalemli-Ozcan, Sebnem; … - 2023 - Last updated: June 9, 2023
We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms' borrowing capacity to smooth temporary shocks to liquidity. In this framework, firm exit...