Zhaohui Chen (McIntire School, University of Virginia) presenting 'How Much Liquidity Insurance Do Credit Lines Provide?' A substantial literature treats credit lines as a form of committed liquidity insurance. The authors provide evidence that challenges this perspective. Borrowing rates hold for a relatively short period of time and firms that draw on a line of credit face higher interest rates and more stringent contract terms upon renewal than do similar firms that did not draw on credit lines. Moreover, banks have considerable capacity for forcing renegotiation and thereby limiting a firm’s benefit from drawing on a credit line. As a consequence, firms that rely heavily on credit lines for liquidity insurance may forgo positive NPV projects. The authors find that bank reputation and prior lending relationships improve the efficiency of credit lines.