The effect of supply chain power on bank financing

Mohammad M. Rahaman, Raghavendra Rau and Ashraf Al Zaman

Journal of Banking & Finance, 2020, vol. 114, issue C

Abstract: Using comprehensive bank-loan contract information, we show that the power of a firm relative to its suppliers eases its terms of bank financing, specifically through lower loan prices and less restrictive non-price contract terms. Our results are robust to controlling for product-market competition. Supply chain power enables the firm to achieve a greater level of control over its inventory, constituting a significant portion of the reduction in its overall loan cost. We argue that it is important to consider supply-chain related issues when analyzing the external-financing capacity of firms.

Keywords: Supply chain; Cost of debt; Bank financing; Product-market competitiveness; Inventory control (search for similar items in EconPapers)
JEL-codes: G00 G21 G30 G32 L14 L23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:114:y:2020:i:c:s0378426620300698

DOI: 10.1016/j.jbankfin.2020.105801

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