Dislocated Credit: Captive Lending as Liquidity Management.

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Event details

Date 08.03.2024
Hour 11:4513:00
Speaker Daniel Paravisini - London School of Economics
Location
UniL Campus, Room Extra 126
Category Conferences - Seminars
Event Language English

We study the impact of vertical integration of manufacturing and credit provision on the propagation of financial shocks in durable good markets. Captive lending enables manufacturers affected by financing shocks to generate liquidity through a dislocation in lending terms and standards, that increases the cash collected up front from the sale of inventory.  We provide evidence exploiting a multi-country dataset on securitized car loans and quasi-exogenous variation from the Volkswagen emissions scandal. Our results show that the direction, magnitude and heterogeneity of financial shock transmission is altered when financial intermediation is internalized by manufacturers.