EconPapers    
Economics at your fingertips  
 

Trade Credit: Suppliers as Debt Collectors and Insurance Providers

Vicente Cuñat ()

Review of Financial Studies, 2007, vol. 20, issue 2, 491-527

Abstract: This article examines how in a context of limited enforceability of contracts suppliers may have a comparative advantage over banks in lending to customers because they are able to stop the supply of intermediate goods. Suppliers may act also as liquidity providers, insuring against liquidity shocks that could endanger the survival of their customer relationships. The relatively high implicit interest rates of trade credit are the result of insurance and default premiums that are amplified whenever suppliers face a relatively high cost of funds. I explore these effects empirically for a panel of UK firms.

JEL-codes: D92 G30 M13 (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (32) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhl015 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Trade credit: Suppliers as debt collectors and insurance providers (2004) Downloads
Working Paper: Trade Credit: Suppliers as Debt Collectors and Insurance Providers (2000) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:20:y:2007:i:2:p:491-527.

Ordering information: This journal article can be ordered from
http://www4.oup.co.uk/revfin/subinfo/

Access Statistics for this article

Review of Financial Studies is currently edited by Maureen O'Hara

More articles in Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press () and Christopher F. Baum ().

 
Page updated 2021-10-31
Handle: RePEc:oup:rfinst:v:20:y:2007:i:2:p:491-527.