EconPapers    
Economics at your fingertips  
 

Measuring the Systemic Risk in Interfirm Transaction Networks

Makoto Hazama and Iichiro Uesugi ()

No 66, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: Using a unique and massive data set that contains information on interfirm transaction relationships, this study examines default propagation in trade credit networks and provides direct and systematic evidence of the existence and relevance of such default propagation. Not only do we implement simulations in order to detect prospective defaulters, we also estimate the probabilities of actual firm bankruptcies and compare the predicted defaults and actual defaults. We find, first, that an economically sizable number of firms are predicted to fail when their customers default on their trade debt. Second, these prospective defaulters are indeed more likely to go bankrupt than other firms. Third, firms that have abundant external sources of financing or whose transaction partners have such abundant sources are less likely to go bankrupt even when they are predicted to default. This provides evidence for the existence and relevance of firms – called “deep pockets” by Kiyotaki and Moore (1997) – that can act as shock absorbers.

Keywords: interfirm networks; trade credit; default propagation (search for similar items in EconPapers)
JEL-codes: E32 G21 G32 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-mac, nep-rmg and nep-sbm
Date: 2017-02
Note: (Forthcoming in Journal of Economic Behavior and Organization)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/28392/1/wp066.pdf (application/pdf)

Related works:
Working Paper: Measuring the Systemic Risk in Interfirm Transaction Networks (2012) 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:hit:remfce:66

Access Statistics for this paper

More papers in HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University Contact information at EDIRC.
Bibliographic data for series maintained by Digital Resources Section, Hitotsubashi University Library ().

 
Page updated 2018-09-13
Handle: RePEc:hit:remfce:66