Curbing Shocks to Corporate Liquidity: The Role of Trade Credit

Niklas Amberg, Tor Jacobson, Erik von Schedvin () and Robert Townsend

No 22286, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using data on exogenous liquidity losses generated by the fraud and failure of a cash-in-transit 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.

JEL-codes: D22 G30 (search for similar items in EconPapers)
Date: 2016-05
New Economics Papers: this item is included in nep-ban
Note: CF
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Citations: View citations in EconPapers (5)

Published as Niklas Amberg & Tor Jacobson & Erik von Schedvin & Robert Townsend, 2021. "Curbing Shocks to Corporate Liquidity: The Role of Trade Credit," Journal of Political Economy, vol 129(1), pages 182-242.

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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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