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 comprehensive bank-loan contract information, we show that the power of a firm relative to its suppliers eases its terms of bank financing, specifically through lower loan prices and less restrictive non-price contract terms. Our results are robust to controlling for product-market...

This paper investigates firms’ use of precautionary savings to manage the risk of distress spillovers from supply chain partners. Firms increase cash holdings when their principal customers have a larger fraction of long-term debt maturing in one year. Analysis exploiting predetermined...

We show that firms exposed to the H1N1 and COVID-19 pandemics curtail trade receivable days for their clients but also face shorter payment periods for their own trade payables. Moreover, firms with lower financial flexibility experience a larger decrease in trade credits; however, firms with...

Firm's social network can bring about competition advantage, while trade credit may reflect the competitiveness of firm's business operations, but it is a pity that there is a lack of studies on the social network and business credit. This paper investigate the influence of different degrees of...

We present evidence that restrictions to the set of feasible financial contracts affect buyer - supplier relationships and the organizational form of the firm. We exploit a regulation that restricted the maturity of the trade credit contracts that a large retailer could sign with some of its...

Trade credit is a widely adopted industry practice. Prior research has focused on how trade credit benefits firms by improving vertical supply chain relationships. This paper offers a novel perspective by examining whether trade credit benefits suppliers through a horizontal channel. Under the...

Using unique daily data of payment defaults on suppliers in France, we show how the trade credit channel amplified the demand shock that firms met during the COVID-19 crisis. That channel dramatically increased short-term liquidity needs during the first months of the pandemic. A one standard...