Trade credit and the joint effects of supplier and customer financial characteristics

Jaideep Shenoy and Ryan Williams

Journal of Financial Intermediation, 2017, vol. 29, issue C, 68-80

Abstract: We examine how access to bank credit affects trade credit in the supplier–customer relationships of U.S. public firms. For identification, we use exogenous liquidity shocks to supplier firms in the form of staggered changes to interstate bank branching laws. Using a variety of tests, we show that supplier firms with greater access to banking liquidity offer more trade credit to their customers. We also show that when bank branching restrictions are relaxed in the supplier’s state, the supplier–customer relationship is more likely to survive.

Keywords: Trade credit; Supplier–customer relationships; Bank lines of credit; Banking deregulation; Contagion; Financial distress (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (54)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:29:y:2017:i:c:p:68-80

DOI: 10.1016/j.jfi.2015.09.001

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