The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Funding Liquidity without Banks: Evidence from a Shock to the Cost of Very Short‐Term Debt
Published: 07/06/2019 | DOI: 10.1111/jofi.12832
FELIPE RESTREPO, LINA CARDONA‐SOSA, PHILIP E. STRAHAN
In 2011, Colombia instituted a tax on repayment of bank loans, which increased the cost of short‐term bank credit more than long‐term credit. Firms responded by cutting short‐term loans for liquidity management purposes and increasing the use of cash and trade credit. In industries in which trade credit is more accessible (based on U.S. Compustat firms), we find substitution into accounts payable and little effect on cash and investment. Where trade credit is less available, firms increase cash and cut investment. Thus, trade credit provides an alternative source of liquidity that can insulate some firms from bank liquidity shocks.
The Real Effects of Credit Ratings: The Sovereign Ceiling Channel
Published: 06/02/2016 | DOI: 10.1111/jofi.12434
HEITOR ALMEIDA, IGOR CUNHA, MIGUEL A. FERREIRA, FELIPE RESTREPO
We show that sovereign debt impairments can have a significant effect on financial markets and real economies through a credit ratings channel. Specifically, we find that firms reduce their investment and reliance on credit markets due to a rising cost of debt capital following a sovereign rating downgrade. We identify these effects by exploiting exogenous variation in corporate ratings due to rating agencies' sovereign ceiling policies, which require that firms' ratings remain at or below the sovereign rating of their country of domicile.