Ensuring that a firm has sufficient liquidity to finance valuable projects that occur in the future is at the heart of the practice of financial management. Yet, while discussion of these issues goes back at least to Keynes (1936), a substantial literature on the ways in which firms manage...

We use a unique dataset to show how firms in Europe used credit lines during the financial crisis. We find that firms with restricted access to credit (small, private, non-investment grade, and unprofitable) draw more funds from their credit lines during the crisis than their large, public,...

We study the implications of hedging for corporate financing and investment. We do so using an extensive, hand-collected dataset on corporate hedging activities. Hedging can lower the odds of negative realizations, thereby reducing the expected costs of financial distress. In theory, this should...

We use the 2007 credit crisis to assess the effect of financial contracting on real corporate behavior. We identify heterogeneity in financial contracting at the onset of the crisis by exploring ex-ante variation in long-term debt maturity. Our empirical methodology uses an experiment-like...

Almeida, Campello, and Galvao (2010) [ACG] use Monte Carlo simulations and real data to assess the performance of estimators that deal with measurement errors in investment models. ACG are the first to provide an independent assessment of alternative methods, showing when they work properly and...

We model corporate liquidity policy and show that aggregate risk exposure is a key determinant of how firms choose 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...

This paper uses a unique dataset to study how firms managed liquidity during the 2008-09 financial crisis. Our analysis provides new insights on interactions between internal liquidity, external funds, and real corporate decisions, such as investment and employment. We first describe how...

Big data on job vacancy postings reveal multiple facets of the impact of Covid-19 on the U.S. job market. Firms have disproportionately cut on hiring for high-skill jobs (downskilling), with small firms nearly halting their hiring altogether. New-hiring cuts and downskilling are most pronounced...

There is ample empirical evidence of a negative relation between internal funds (profitability) and the demand for external funds (debt issuance). This negative relation has been interpreted as evidence for external financing costs arising from capital market frictions such as asymmetric...

We model the interplay between cash and debt policies in the presence of financial constraints. While saving cash allows financially constrained firms to hedge future investment against income shortfalls, reducing current debt (saving debt capacity) is a more effective way to boost investment in...