We examine the heterogeneous propagation of the liquidity shortage through the supply-chain network. We find an increase of accounts receivable of a firm when its customer has strong bargaining power and financial vulnerability. Using a relation-level fixed-effects model, we find that the...

We propose the substitution hypothesis of inventory investment that predicts firms use of inventory to provide liquidity for financially constraint suppliers. Using the exhaustive data set of supplier information for Japanese listed firms, we find an increase in inventory financing when a...