The impact of economic uncertainty on corporate trade credit policy: insights from the COVID-19 pandemic

Jon Fulkerson, Hinh D. Khieu and Thanh Ngo

Applied Economics, 2025, vol. 57, issue 46, 7478-7494

Abstract: During the COVID-19 pandemic, firms exposed to the crisis faced simultaneous shocks to product demand and supply chains. As a result, they faced changing dynamics and greater uncertainty for trade credit for both suppliers and customers. Using regression analyses on quarterly data around the pandemic outbreak, we find that US non-financial firms demanded quicker payments from customers and faced shorter payment periods themselves during the pandemic. We also document that reduced trade credit was more pronounced for financially constrained firms and those with lower operating flexibility. Interestingly, government supplier firms’ trade credit remains unaffected by their COVID-19 exposure. These findings support the precautionary motives guiding firms’ trade credit policies in the face of economic uncertainty.

Date: 2025
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DOI: 10.1080/00036846.2024.2393445

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