Trade Credit and the Joint Effects of Supplier and Customer Financial Characteristics

33 Pages Posted: 15 Mar 2011 Last revised: 19 Feb 2016

See all articles by Jaideep Shenoy

Jaideep Shenoy

University of Connecticut - Department of Finance

Ryan Williams

Université Paris-Dauphine, PSL Research University; Enoda

Date Written: August 15, 2015

Abstract

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 that supplier firms with greater access to banking liquidity offer more trade credit to their customers. We also document a higher likelihood of survival of supplier-customer relationships in states that relax bank branching restrictions. Overall, our paper explores the real effects of banking competition on supplier-customer relationships of public firms.

Keywords: Trade credit, supplier-customer relationships, bank lines of credit, banking deregulation, contagion, financial distress

JEL Classification: G30, G32, G33

Suggested Citation

Shenoy, Jaideep and Williams, Ryan, Trade Credit and the Joint Effects of Supplier and Customer Financial Characteristics (August 15, 2015). Journal of Financial Intermediation, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1786282 or http://dx.doi.org/10.2139/ssrn.1786282

Jaideep Shenoy (Contact Author)

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

Ryan Williams

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Lattre de Tassigny
Paris, 75016
France

Enoda ( email )

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