Show me the receipts: B2B payment timeliness and expected returns

Paul Lieberman, Atanas Mihov, Andy Naranjo and Mihail Velikov

Journal of Financial Economics, 2025, vol. 172, issue C

Abstract: Trade credit is an important source of firm financing, yet its rich informational content pertaining to payment timeliness is under-explored in asset pricing. Using an extensive data set from a leading private information exchange on business payment performance, we study the effects of trade credit payment timeliness on stock returns. We document two distinct channels through which trade credit payment behavior impacts future stock returns — slow diffusion of information and risk stemming from a customer firm’s vertical bargaining power position in the supply chain. Consistent with our first channel, a sudden delay in a firm’s payment to its suppliers predicts significantly lower future returns for its stock. Consistent with our second channel, firms that pay their bills moderately late on a consistent basis relative to terms earn significantly higher stock returns.

Keywords: B2B payments; Trade credit; Payment behavior; Stock returns (search for similar items in EconPapers)
JEL-codes: G12 G14 G32 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:172:y:2025:i:c:s0304405x25001163

DOI: 10.1016/j.jfineco.2025.104108

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