Trade credit and the joint effects of supplier and customer financial characteristics

Jaideep Shenoy, Ryan Williams

Research output: Contribution to journalArticlepeer-review

28 Scopus citations

Abstract

We examine how access to bank credit affects trade credit in the supplier–customer relationships of U.S. public firms. For identification, we use exogenous liquidity shocks to supplier firms in the form of staggered changes to interstate bank branching laws. Using a variety of tests, we show that supplier firms with greater access to banking liquidity offer more trade credit to their customers. We also show that when bank branching restrictions are relaxed in the supplier's state, the supplier–customer relationship is more likely to survive.

Original languageEnglish (US)
Pages (from-to)68-80
Number of pages13
JournalJournal of Financial Intermediation
Volume29
DOIs
StatePublished - Jan 1 2017

Keywords

  • Bank lines of credit
  • Banking deregulation
  • Contagion
  • Financial distress
  • Supplier–customer relationships
  • Trade credit

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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