This paper models an unexplored source of liquidity risk large broker-dealers face: a withdrawal of collateral providers. By setting different contracting terms on repurchase agreements with cash borrowers and lenders, dealers can source funds for their own activities. Cash borrowers internalize the risk of losing their collateral in case their dealer defaults, prompting them to withdraw it. This incentive creates strategic complementarities among collateral providers, reducing a dealer’s liquidity position and compromising their solvency. Collateral runs are triggered by a contraction in dealers’ assets making them markedly different than traditional wholesale funding runs. Mitigating these risks involves different policy recommendations.

We study the effect of personal wealth on entrepreneurial decisions using data on mineral payments from Texas shale drilling to individuals throughout the United States. Large cash windfalls increase business formation by 0.8 to 2.1 percentage points, but do not affect transitions to self-employment. By contrast, cash windfalls significantly extend self-employment spells, but do not affect the duration of business ownership. Our findings help reconcile contrasting findings in prior work: liquidity constraints have different effects on entrepreneurial activity that may depend on the entrepreneur’s motivations.