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...

We argue that a firm's aggregate risk is a key determinant of whether it manages its future liquidity needs through 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...

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...

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...

"We argue that a firm's aggregate risk is a key determinant of whether it manages its future liquidity needs through 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...