Download this Paper Open PDF in Browser

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

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

Jaideep Shenoy

University of Connecticut

Ryan Williams

University of Arizona - Department of Finance

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 ( email )

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

Ryan Williams

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

Paper statistics

Downloads
336
Rank
73,697
Abstract Views
1,310