Financial Contagion in International Supply-Chain Networks

87 Pages Posted: 2 Feb 2017 Last revised: 25 Aug 2021

See all articles by Christoph Schiller

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: February 1, 2017

Abstract

This paper studies the role of cross-border supply-chains for international financial contagion. Following large country-level shocks abroad, such as country-index return jumps and natural disasters, the dynamic conditional correlation (DCC) of stock returns between U.S. suppliers and their international customers increases by 7% of a standard deviation relative to matched placebo firm-pairs. This increase is beyond any country- or industry-effects and persists for 20 weeks. Consistent with a credit-chain mechanism, I find a significant increase in supplier CDS spreads following such shocks, and document that contagion is increasing with trade credit usage, customer shock exposure, and cost of bankruptcy resolution.

Keywords: Financial Contagion, Supply Chains, Shock Propagation, Trade Credit

JEL Classification: G15, G32, F40, F65

Suggested Citation

Schiller, Christoph, Financial Contagion in International Supply-Chain Networks (February 1, 2017). Available at SSRN: https://ssrn.com/abstract=2909132 or http://dx.doi.org/10.2139/ssrn.2909132

Christoph Schiller (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

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