Inter-Enterprise Credit and Adjustment During Financial Crises: The Role of Firm Size

Posted: 7 Aug 2019

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Marco Frigerio

University of Milan

Date Written: December 16, 2016

Abstract

Analyzing a large firm-level database for European countries, the paper shows that during the Great Recession trade credit amplified the liquidity squeeze on SMEs induced by the contraction of bank credit. Because of their generally weaker bargaining power in the inter-enterprise credit market, SMEs sharply increased their net trade credit and thus transferred financial resources to larger firms. The paper finds that the liquidity squeeze induced by trade credit had large negative effects on real activity by SMEs, contributing to the fall in employment, wages and investments.

Keywords: trade credit, financial crises, SMEs

JEL Classification: G01, G30

Suggested Citation

Coricelli, Fabrizio and Frigerio, Marco, Inter-Enterprise Credit and Adjustment During Financial Crises: The Role of Firm Size (December 16, 2016). Available at SSRN: https://ssrn.com/abstract=3431558

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

Via Mattioli, 10
Siena, 53100
Italy

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Marco Frigerio

University of Milan ( email )

Via Festa del Perdono 7
Milano, 20121
Italy

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