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 …

holding and its substitutes, trade credit and short-term bank finance, the study develops a panel vector autoregression that … signalling theory of trade credit and show that firms experiencing liquidity shocks resort to cash or trade credit but not to … bank finance. Increasing cash improves access to trade credit. Additional cash or trade credit triggers a slowdown of the …

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 …