COVID-19 and Disruptions of Trade Credit along the Supply Chains

COVID-19 threatens global supply chains, as reflected by trade credit volumes. We use Sweden, and its choice to not lock-down, as part of our identification strategy. When firms are allocated into groups based on their distance to end-consumers, we find that the flow of trade credit in Sweden was disrupted more severely for the downstream firms. For every €100M in sales, Swedish downstream firms extended €9.3M less credit to their customers, compared to other downstream firms in Western Europe. On the other hand, these consumer-adjacent firms received €1.3M more trade credit for every €100M in assets. Our results indicate that the decision to not implement a mandatory lockdown disrupted the flow of trade credit primarily in the downstream part of the supplychain