Trade Credit in the Product Market Network

51 Pages Posted: 18 Jul 2019 Last revised: 8 Oct 2019

See all articles by John J. McConnell

John J. McConnell

Purdue University

Jing Wang

University of Missouri - Columbia

Liying Wang

University of Nebraska at Lincoln

Date Written: October 8, 2019

Abstract

We document that industry positions in the product market network – a feature exogenous to individual firms – significantly influences firms’ use and extension of trade credit. Specifically, firms in higher centrality customer industries use more trade credit and firms in higher centrality supplier industries provide less trade credit than other firms. These results are robust to controlling for other industry features including direct trade connections and product specificity. The evidence from examining the interest rates of accounts receivable and two negative liquidity shocks suggests that central industries’ high likelihood to propagate liquidity shocks grants them advantages in trade credit negotiations.

Keywords: Trade credit, Product market network, Industry centrality, Shock propagation

JEL Classification: G32, L14, E23

Suggested Citation

McConnell, John J. and Wang, Jing and Wang, Liying, Trade Credit in the Product Market Network (October 8, 2019). Available at SSRN: https://ssrn.com/abstract=3421623 or http://dx.doi.org/10.2139/ssrn.3421623

John J. McConnell

Purdue University ( email )

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Jing Wang (Contact Author)

University of Missouri - Columbia ( email )

Columbia, MO 65203
United States

Liying Wang

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

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