Supply Chain Finance and Firm Capital Structure

Laura Bottazzi, Goutham Gopalakrishna and Claudio Tebaldi

No 18468, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model the joint financial decisions of a bank, a supplier, and their customers when firms have access to a factoring service to support a trade credit agreement. To explore the nexus between firms’ capital structure and the intensity of their financial and productive interlinkages we develop a structural model that integrates a ’supply chain of credit’ with a model of ’downstream competition’ for customers and rationalizes the emergence of the granular networks that shape firms risk exposure. We exploit information from a proprietary dataset to identify a number of empirical regularities that correlate the use of factoring services offered by the bank with customers’ and suppliers’ capital structure determinants.

Date: 2023-09
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