scholarly journals Liquidity Management of U.S. Global Banks: Internal Capital Markets in the Great Recession

2011 ◽  
Author(s):  
Nicola Cetorelli ◽  
Linda S. Goldberg
Keyword(s):  
Capital Markets ◽  
Great Recession ◽  
Internal Capital Markets ◽  
Liquidity Management ◽  
The Great Recession ◽  
Internal Capital ◽  
Global Banks

scholarly journals How Do Internal Capital Markets Work? Evidence from the Great Recession*

2019 ◽  
Vol 24 (4) ◽  
pp. 847-889 ◽  
Author(s):  
David Buchuk ◽  
Borja Larrain ◽  
Mounu Prem ◽  
Francisco Urzúa Infante
Keyword(s):  
Capital Markets ◽  
Emerging Market ◽  
Internal Capital Markets ◽  
Control Rights ◽  
High Q ◽  
The Great Recession ◽  
Formal Control ◽  
Internal Capital ◽  
Better Than ◽  
Unique Dataset

Abstract We study the inner workings of internal capital markets during the 2008–09 recession using a unique dataset of loans between business group firms in an emerging market. Intragroup loans increase quickly during the recession. Firms that are more central in the ownership network simultaneously increase lending and borrowing. Acting like simple intermediaries, central firms do not increase net lending. Our results imply that formal control rights are essential for intermediation in internal capital markets, particularly during distress. In line with previous results on winner-picking, receivers of intragroup loans are high-Q, financially constrained firms, which also perform significantly better than providers during the recession.

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