Curbing Shocks to Corporate Liquidity: The Role of Trade Credit

Niklas Amberg, Tor Jacobson (), Erik von Schedvin () and Robert Townsend ()
Additional contact information
Tor Jacobson: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Robert Townsend: Department of Economics, Postal: 77 Massachusetts Ave, Cambridge, MA 02139,, USA

No 320, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Using data on exogenous liquidity losses generated by the fraud and failure of a cash-intransit firm, we demonstrate a causal impact on firms’ trade credit usage. We find that firms manage liquidity shortfalls by increasing the amount of drawn credit from suppliers and decreasing the amount issued to customers. The compounded trade credit adjustments are at least as great, if not greater than corresponding adjustments in cash holdings, suggesting that trade credit positions are economically important sources of reserve liquidity. The underlying mechanism in trade credit adjustments is in part due to shifts in credit durations—both upstream and downstream.

Keywords: Liquidity management; Trade credit; Risk sharing (search for similar items in EconPapers)
JEL-codes: D22 G30 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2016-05-01
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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http://www.riksbank.se/Documents/Rapporter/Working ... rap_wp320_160512.pdf (application/pdf)

Related works:
Journal Article: Curbing Shocks to Corporate Liquidity: The Role of Trade Credit (2021)
Working Paper: Curbing Shocks to Corporate Liquidity: The Role of Trade Credit (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0320

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