Customer and supplier pressure on financial distress: evidence from USA

Post Raj Pokharel

American Journal of Finance and Accounting, 2025, vol. 8, issue 4, 340-364

Abstract: This study examines the customer and supplier pressure through the effect of trade credit on financial distress using 30 years of USA corporate data (1992-2023) from the Compustat database. The findings reveal a nuanced relationship: an increase in trade payables elevates the likelihood of financial distress, while trade receivables mitigate distress up to a threshold. The study further documents a U-shaped relationship between trade payables and financial distress, and an inverted U-shaped relationship between trade receivables and economic health. This study contributes to the literature by uncovering non-linear dynamics between trade credit and financial distress, enriching managerial and policy insights.

Keywords: financial distress; trade credit; liquidity; creditors; debtors; bankruptcy; Altman_Z. (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ids:amerfa:v:8:y:2025:i:4:p:340-364

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