Economics at your fingertips  

Trade Credit Use as Firms Approach Default

Emilia Garcia‐appendini and Judit Montoriol‐garriga
Authors registered in the RePEc Author Service: Emilia Garcia-Appendini () and Judit Montoriol Garriga ()

Journal of Money, Credit and Banking, 2020, vol. 52, issue 5, 1199-1229

Abstract: Using a sample of distressed firms with information about suppliers, we document an average fall in the use of trade credit as firms approach bankruptcy compared to a control sample of nonbankrupt firms. However, we uncover a large degree of heterogeneity across suppliers. Suppliers facing high switching costs maintain their business ties with the distressed firms as they approach bankruptcy, and provide them more trade credit. Suppliers in concentrated markets provide temporary support to their clients. Overall, the findings of this paper suggest that switching costs are fundamental to explain whether suppliers provide liquidity to their distressed clients or not.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)

Related works:
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:

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().

Page updated 2022-06-30
Handle: RePEc:wly:jmoncb:v:52:y:2020:i:5:p:1199-1229