Credit and credit risk permeates every corner of the financial world. Previously credit tended to be acknowledged only … when dealing with counterparty credit risk, high-yield debt or credit-linked derivatives, now it affects all things … credit from the beginning-the point at which any borrowing entity (sovereign, corporate, etc.) decides to raise capital …

cash reserves or bank lines of credit. 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 from banks and opt for cash reserves in spite of higher … have a higher ratio of cash reserves to lines of credit, controlling for other determinants of liquidity policy. This …