Norges Bank

Working Paper

Disclosing the undisclosed: Commercial paper as hidden liquidity buffers

Author:
Sven Klingler and Olav Syrstad
Series:
Working Paper
Number:
16/2021

Using new transaction-level data for non-financial commercial paper (CP) in the U.S., we show that companies systematically reduce their outstanding short-term debt on quarterly and annual disclosure dates. Constraints on CP lending supply cannot explain this pattern. Instead, companies optimize their disclosed liquidity buffers and strategically repay CP debt if doing so strengthens common accounting ratios, such as the current ratio. Unlike other CP issuers, firms that repay their CP debt neither hold lower cash buffers nor use CP as bridge financing, suggesting an alternative role of CP debt as "hidden liquidity buffer".

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ISSN 1502-8190 (online)

Published 17 December 2021 14:16
Published 17 December 2021 14:16