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 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...

Trade credit extended to suppliers in the video game industry does not serve as a commitment device for large customers in determining which vendors to make relationship-specific investments in. Suppliers of video games are better off investing in relationships with trade creditors than seeking...

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...

This study investigates the substitution financing effect of suppliers' trade credit on customers' trade-credit using Chinese listed firms from 2009 to 2018. Results verify the substitution financing effect of suppliers' trade credit on customers' trade credit, indicating that firms with higher...

This paper examines differences in the use of trade credit by publicly listed firms and their privately held counterparts. We show that public firms maintain a significantly lower level of trade credit than private firms. This finding is consistent with the argument that public firms rely less...

We examine a novel but economically important characterization of trade credit relationships in which large investment-grade buyers borrow from their substantially smaller, often credit- constrained, suppliers. Using variation in large retailers' aggregate cash management policies as a shock to...

We find evidence that input suppliers provide credit quality certification to their borrowers. Banks are more likely to lend to firms that have been granted trade credit by their suppliers and to firms that pay higher proportions of their trade credit debts on time. This ‘certification' role...

Extending the existing redistribution theory to Chinese manufacturing firms, we find that the provision of trade credit through investing in accounts receivable is significantly correlated with the amount of funds raised through providers' equity finance, suggesting that firms not only...

Despite the importance of the hypothesis that trade creditors may act as relationship lenders, it has been virtually impossible to directly test this hypothesis because of a lack of data. We attempt to overcome this problem by using a relatively new Japanese database on small and midsized...