Bank stability and the price of loan commitments

OnderzoeksoutputAcademicpeer review

4 Citaten (Scopus)
128 Downloads (Pure)


Firms insure themselves from liquidity shocks by contracting on credit lines from banks. I document novel empirical evidence on how the risk of contract nonperformance by banks is priced. Firms pay a higher price for loan commitments from safer banks. A one standard deviation increase in the cross-sectional mean of bank capital increases the commitment fees by 5%. To investigate a potential causal effect of lender stability on commitment fees, I exploit exogenous variation in the market value of banks’ assets from natural disasters. The sensitivity of the fees is higher for firms with higher short-term liabilities and higher income uncertainty.
Originele taal-2English
Aantal pagina's16
TijdschriftJournal of Financial Intermediation
StatusPublished - apr.-2023

Citeer dit