Money Market Reforms: The Effect on the Commercial Paper Market

Kyle Allen; Pritam Saha; Matthew Whitledge; Drew Winters

doi:10.1016/j.jbankfin.2023.106947

Money Market Reforms: The Effect on the Commercial Paper Market

Kyle Allen, Pritam Saha, Matthew Whitledge, Drew Winters

Finance Department

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

This study examines the effects of the 2016 Securities and Exchange Commission (SEC) reforms of Money Market Funds (MMFs) on the commercial paper market. By exploiting the differential time effect, we document a rise in the commercial paper (CP) rates. The rise in CP rates is more pronounced when the shadow floating NAV period starts and is similar across different types of commercial paper. Our cross-sectional analysis finds support for relationship-based lending in both commercial paper holdings and rates. We find that big issuers experienced a decrease and small issuers observed an increase in commercial paper outstanding from MMFs in the post-period. We find no evidence that rates vary across the size of the issuer in the post-period. Finally, financial institutions pay higher rates in the post-period than non-financial institutions.

Original language	American English
Article number	106947
Journal	Journal of Banking and Finance
Volume	154
DOIs	https://doi.org/10.1016/j.jbankfin.2023.106947
State	Published - Sep 2023

Keywords

Commercial paper
Money market funds
Relationship lending

EGS Disciplines

Finance and Financial Management

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10.1016/j.jbankfin.2023.106947

https://scholarworks.boisestate.edu/cgi/viewcontent.cgi?article=1033&context=finance_facpubsLicense: CC BY-NC-ND

Cite this

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title = "Money Market Reforms: The Effect on the Commercial Paper Market",

abstract = " This study examines the effects of the 2016 Securities and Exchange Commission (SEC) reforms of Money Market Funds (MMFs) on the commercial paper market. By exploiting the differential time effect, we document a rise in the commercial paper (CP) rates. The rise in CP rates is more pronounced when the shadow floating NAV period starts and is similar across different types of commercial paper. Our cross-sectional analysis finds support for relationship-based lending in both commercial paper holdings and rates. We find that big issuers experienced a decrease and small issuers observed an increase in commercial paper outstanding from MMFs in the post-period. We find no evidence that rates vary across the size of the issuer in the post-period. Finally, financial institutions pay higher rates in the post-period than non-financial institutions.",

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author = "Kyle Allen and Pritam Saha and Matthew Whitledge and Drew Winters",

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year = "2023",

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doi = "10.1016/j.jbankfin.2023.106947",

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T1 - Money Market Reforms: The Effect on the Commercial Paper Market

AU - Allen, Kyle

AU - Saha, Pritam

AU - Whitledge, Matthew

AU - Winters, Drew

PY - 2023/9

Y1 - 2023/9

N2 - This study examines the effects of the 2016 Securities and Exchange Commission (SEC) reforms of Money Market Funds (MMFs) on the commercial paper market. By exploiting the differential time effect, we document a rise in the commercial paper (CP) rates. The rise in CP rates is more pronounced when the shadow floating NAV period starts and is similar across different types of commercial paper. Our cross-sectional analysis finds support for relationship-based lending in both commercial paper holdings and rates. We find that big issuers experienced a decrease and small issuers observed an increase in commercial paper outstanding from MMFs in the post-period. We find no evidence that rates vary across the size of the issuer in the post-period. Finally, financial institutions pay higher rates in the post-period than non-financial institutions.

AB - This study examines the effects of the 2016 Securities and Exchange Commission (SEC) reforms of Money Market Funds (MMFs) on the commercial paper market. By exploiting the differential time effect, we document a rise in the commercial paper (CP) rates. The rise in CP rates is more pronounced when the shadow floating NAV period starts and is similar across different types of commercial paper. Our cross-sectional analysis finds support for relationship-based lending in both commercial paper holdings and rates. We find that big issuers experienced a decrease and small issuers observed an increase in commercial paper outstanding from MMFs in the post-period. We find no evidence that rates vary across the size of the issuer in the post-period. Finally, financial institutions pay higher rates in the post-period than non-financial institutions.

KW - Commercial paper

KW - Money market funds

KW - Relationship lending

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UR - https://scholarworks.boisestate.edu/finance_facpubs/35

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DO - 10.1016/j.jbankfin.2023.106947

M3 - Article

SN - 0378-4266

VL - 154

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

M1 - 106947

ER -

Money Market Reforms: The Effect on the Commercial Paper Market

Abstract

Keywords

EGS Disciplines

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