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The authors use firm-level data to examine the interplay between the use of lines of credit and commercial paper, which reveals the real effects of the recent financial crisis on nonfinancial firms. The authors find that aggregate commercial paper borrowing declined 15% after the collapse of Lehman Brothers, but the effect was concentrated among firms with high default risk: CP-rated firms with high default risk reduced their commercial paper divided by assets by 91% from the pre-crisis level. These high default risk firms drew heavily from existing lines of credit to substitute lost borrowing from the commercial paper market. However, there is no evidence that firms with low default risk drew excessively from their lines of credit and hoarded cash.
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