Credit lines: The other side of corporate liquidity

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• dc.contributor.author Ippolito, Filippoca
• dc.contributor.author Pérez Orive, Anderca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2017-07-26T10:46:33Z
• dc.date.available 2017-07-26T10:46:33Z
• dc.date.issued 2012-03-01
• dc.date.modified 2017-07-23T02:14:17Z
• dc.description.abstract In this paper we offer the first large sample evidence on the availability and usage of credit lines in U.S. public corporations and use it to re-examine the existing findings on corporate liquidity. We show that the availability of credit lines is widespread and that average undrawn credit is of the same order of magnitude as cash holdings. We test the trade-off theory of liquidity according to which firms target an optimum level of liquidity, computed as the sum of cash and undrawn credit lines. We provide support for the existence of a liquidity target, but also show that the reasons why firms hold cash and credit lines are very different. While the precautionary motive explains well cash holdings, the optimum level of credit lines appears to be driven by the restrictions imposed by the credit line itself, in terms of stated purpose and covenants. In support to these findings, credit line drawdowns are associated with capital expenditures, acquisitions, and working capital.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1311
• dc.identifier.uri http://hdl.handle.net/10230/19914
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1311
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword cash holdings
• dc.subject.keyword credit lines
• dc.subject.keyword lines of credit
• dc.subject.keyword revolving credit facilities
• dc.subject.keyword trade-off theory
• dc.subject.keyword liquidity
• dc.subject.keyword financial constraints
• dc.subject.keyword covenants
• dc.subject.keyword Finance and Accounting
• dc.subject.keyword Macroeconomics and International Economics
• dc.title Credit lines: The other side of corporate liquidityca
• dc.type info:eu-repo/semantics/workingPaper