under previously committed credit lines. We show that during the collapse of the Asset Backed Commercial Paper market in the … conditions on the outstanding credit lines offered to borrowers in violation of a covenant. Looking at the broader period of the …, following a covenant violation on a credit line. Our paper suggests that a worsening in financial conditions of lenders can bear …

We study how the consequences of violations of covenants associated with bank lines of credit to firms vary with the … financial health of lenders. Following a violation banks restrict usage of lines of credit by raising spreads, shortening … during the recent crisis. Banks in worse financial health are more likely to restrict access to credit lines following a …

between cash and bank credit lines. 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 and opt for cash in spite of higher opportunity costs and … liquidity premium. Likewise, in times when aggregate risk is high, firms rely more on cash than on credit lines. We verify these …

We suggest a new mechanism–the liquidity insurance channel–based on the widespread reliance of high credit quality … firms on bank credit lines for liquidity management. Our model matches the patterns of usage of loans and credit lines in … credit quality firms. Our framework can explain why credit line origination is more cyclical than loan origination. Overall …

The U.S. bank stress tests aim to improve financial system stability. However, they may also affect bank credit supply … Hypothesis, under which stress-tested banks reduce credit supply – particularly to relatively risky borrowers – to decrease their … credit risk. The findings do not support the Moral Hazard Hypothesis, in which these banks expand credit supply …

We explore the impact of the credit crunch that followed the European debt crisis on the corporate policies of European … banks. Our estimates suggest that the credit crunch explains between one-fifth and one-half of the overall negative real …

We show that "zombie credit" - cheap credit to impaired firms - has a disinflationary effect. By helping distressed … firms to stay afloat, such credit creates excess production capacity, thereby putting downward pressure on product prices … zombie credit show lower firm entry and exit rates, markups, and product prices, as well as a misallocation of capital and …