Fragile Financing? How Corporate Reliance on Shadow Banking Affects their Access to Bank Liquidity

Greater reliance on nonbank financing makes firms fragile as it leads banks to limit their access to credit lines. Besides demonstrating this result in panel tests subject to range of controls and robustness checks, we employ the 2014–16 oil-price collapse as an exogenous rollover risk in nonbank financing of non-oil-sector firms by collateralized loan obligations (CLOs) exposed to oil sector firms. Nonbank-reliant firms with looming maturities faced reductions and wider spreads in bank credit lines after the shock, resulting in weaker financial and real performance in spite of their drawdowns of existing credit lines.