Production networks and trade credit

Mariassunta Giannetti

Chapter 2 in Research Handbook on Alternative Finance, 2024, pp 31-48 from Edward Elgar Publishing

Abstract: I review the empirical and theoretical literature on trade credit and identify two main strands of the literature, which focus, respectively, on expensive trade credit to financially constrained firms and on cheap trade credit to customers with high bargaining power. It emerges that trade credit is sometimes an instrument to mitigate financial frictions and ease access to external finance for customers. However, the ability to extend trade credit is also a source of comparative advantage for suppliers and can affect competition in downstream markets. I highlight the consequences of trade credit usage for monetary policy transmission and industrial structure and point out new research avenues, which consider how trade credit affects the stability of production networks.

Keywords: Asian Studies; Business and Management; Economics and Finance; Innovations and Technology (search for similar items in EconPapers)
Date: 2024
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Working Paper: Production Networks and Trade credit (2023)
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