We examine two competing predictions regarding the impact of major customer firms' risk taking on that of their supplier firms. The bargaining power theory holds that when major customers take more risk to enhance their bargaining power and rent extraction ability, suppliers respond by also...

Using a novel dataset of supplier-customer relationships, I develop measures of vertical position of public and private firms in the US economy in order to test trade credit theories. Firms at higher vertical positions have higher profit margins and hold more net trade credit even after...

We document that industry positions in the product market network – a feature exogenous to individual firms – significantly influences firms' use and extension of trade credit. Specifically, firms in higher centrality customer industries use more trade credit and firms in higher centrality...

Trade credit is differentiated from other lending channels by the underlying sales relationship. Using a unique hand-collected dataset of customer-supplier-matched trade credit, I examine how the importance of a customer's sales to its supplier affects trade credit decisions. Contrary to...

In contrast to common literature that suggests that trade credit is an extremely expensive source of financing with annual interest rates exceeding 40 percent, this paper argues that the average interest rate of trade credit does not exceed the cost of alternative funds, with estimated average...

The extant literature on trade credit emphasizes its financing role wherein financially sound firms provide trade credit to ease the credit constraints of weaker trading partners. We offer an alternative, though not mutually exclusive, perspective in which trade credit serves as a commitment...

The extant literature on trade credit emphasizes its financing role wherein financially sound firms provide trade credit to ease the credit constraints of weaker trading partners. We offer an alternative, though not mutually exclusive, perspective in which trade credit serves as a commitment...

We document that borrowers of banks that received capital support under TARP/CPP significantly increased their quarterly provision of trade credit (accounts receivable) during the crisis by 5.2 percent, while borrowers of other banks did not. The effect is strongest in 2008Q4, and larger for...

We explore how trade credit complements cash holdings in product market competition. First, similar to cash to cash flow sensitivity (Almeida, Campello, and Weisbach 2004), we report that trade credit is sensitive to internal cash flows and this sensitivity is moderated by firms' financial...