We show that suppliers cut back on trade credit extensions as they learn about future growth opportunities from their stock prices. We further explore how suppliers’ financial strength, relationship specific investments (RSI), product characteristics, and market power moderate the effect of...

We use unique firm-level data from Mexico to document that non-financial corporations engage in carry trades by borrowing in foreign currency (FX) and lending in domestic currency, largely in the form of trade credit, accumulating currency risk in the process. We show at a quarterly frequency...

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...

We show that production networks are important for the transmission of unconventional monetary policy. Firms with bonds eligible for purchase under the European Central Bank’s Corporate Sector Purchase Program act as financial intermediaries by extending more trade credit to their customers....

Suppliers are exposed to the default risk of customers when selling goods on credit. Some of this risk can be mitigated if suppliers attain the right to initiate insolvency under bankruptcy laws. However, suppliers’ incentives to safeguard their customer base can deter them from initiating...

Scholars and practitioners believe that supply chain visibility (SCV) is critical to effective supply chain management, enabling firms to lower operational costs and enhance efficiency. In this research, we investigate the impact of SCV on firms’ trade credit, a widely neglected yet critical...

This paper makes some selective comparisons of the empirical evidence relating to financial discipline and soft budget constraints in the enterprise sector in China and the transition countries of Central and Eastern Europe and the former Soviet Union (CEEFSU). The paper finds that: (1) in both...

This paper first examines various definitions of Kornai's soft budget constraint (SBC) and the difficulties involved in interpreting data on losses, subsidies and financing, and then considers selective evidence from transition economies. Stocks of overdue trade credit are no larger than in...

This paper investigates how social capital, defined by the strength of civic norms and the density of social networks, affects firms’ trade credit risk. The results show that social capital is negatively related to accounts receivables that are unlikely to be collected, suggesting social...