Garcia-Appendini Awarded by the Asociacion Espanola de Finanzas

At the 19th Foro de Finanzas for a paper about firms as liquidity providers

Emilia Garcia-Appendini (Department of Finance) received the “Premio CAIXA CORP al mejor artículo Corporate Finance” at Asociación Española de Finanzas (AEFIN)’s Foro de Finanzas for Firms as Liquidity Providers: Evidence from the 2007-2008 Financial Crisis (Carefin Working Papers, 5/11, with Judit Montoriol-Garriga, Universitat Autonoma Barcelona)

Abstract: We study the effect of the 2007-2008 financial crisis on between-firm liquidity provision. Consistent with a causal effect of a negative shock to bank credit, we find that firms with high pre-crisis liquidity levels increased the trade credit extended to other corporations, while more ex-ante cash-poor firms decreased the trade credit provided. Trade credit taken by constrained firms increased during this period. These findings are consistent with firms providing liquidity insurance to their clients when bank credit is scarce and provide an important precautionary savings motive for accumulating cash reserves.

The 19th Foro de Finanzas has been held at Universidad de Granada on November 17-18, 2011.