Essays on Finance and Banking

Tamara Vovchak Abstract This dissertation contributes to the literature on financial intermediation by examining the importance of banks as liquidity providers for corporate borrowers and the role of liquidity on banks' financial performance, as well as its role in the context of joint determination with bank capital and risk. It has been accepted in the banking literature that lending relationships are special and bank loans are the important source of external financing for corporate borrowers. Although tight lending relationships have benefits for borrowers it also can pose threads when relationship banks experience liquidity problems. First chapter provides evidence about the transmission of banking sector problems to corporate borrowers, and examines the impact of bank credit supply frictions on firm performance. I exploit differences in the composition of banks' liabilities structure during the financial crisis of 2007-2009 as a source of exogenous variation in the availability of bank credit to nonfinancial firms, in order to identify the causal relationship between bank credit supply and firm performance. My results indicate that banking relationships are important for firms. Firms whose banks relied more on core deposit financing had a lower decline in bank credit during the crisis than those whose..