Bank commitment relationships, cash flow constraints, and liquidity management
By: Donald P. Morgan.
Contributors: Federal Reserve Bank of New York.
Series: Staff reports ;; no. 108; Staff reports (Federal Reserve Bank of New York : Online) ;; no. 108.
Publisher: Federal Reserve Bank of New York
Published: 2000
Place of publication: [New York, N.Y.]
Language: eng
Format: Electronic resource
Subjects: Bank loans.; Banks and banking -- Customer services.
Description: "Evidence in this paper suggests that a close banking relationship--a loan commitment in particular--relaxes cash flow and cash management constraints on firms.  Given firms' prospects (Q), the investment and cash flow correlation is substantially lower when firms have a bank loan commitment.  The difference in cash flow sensitivity reflects differences in firms' cash management practices in the face of cash flow shocks.  Firms with a commitment simply run down their stocks of cash (or borrow more) when their cash flow falls but their investment prospects remain strong.  The different investment-cash flow sensitivities and cash management practices suggest that the firms with a bank commitment relationship are less financially constrained"--Federal Reserve Bank of New York web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 2/18/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.