To make high-quality research more accessible and easier to explore.

Fields:
1 result

A large creditor in contagious liquidity crises

Journal of Banking & Finance 2023 146, 106706
This paper presents a contagious liquidity crises model for nonfinancial firms in which a large creditor influences the extent to which the contagion spreads across firms. We consider a sequential framework where two rollover games occur one after another. A liquidity crisis in one firm triggers a liquidity crisis in another firm through changes in the risk attitudes of creditors from the wealth effect. We show that the presence of a large creditor with a sufficient asset size reduces the contagion effect. Moreover, a concentration of a large creditor’s loan portfolio towards the former firm increases the contagion effect. (JEL G01, G33, D82, D83).