Barter Credit: Warehouses as a Contracting Technology

56 Pages Posted: 5 May 2020 Last revised: 28 Jul 2021

See all articles by Janis Skrastins

Janis Skrastins

Washington University in St. Louis - John M. Olin Business School

Date Written: April 7, 2021

Abstract

A large Brazilian agribusiness lender introduces a new contracting technology: grain warehouses. Using runner-up warehouse locations as a control group, I find that lenders' access to these warehouses permits a new debt contract, i.e. a barter credit repayable in grain, increases borrowers' debt capacity and lowers borrowing costs. The effects are stronger when grain price risk is higher, for municipalities with weaker courts, and for financially-constrained borrowers. These findings are primarily consistent with barter credit reducing financial market imperfections by mitigating borrowers' output price risk.

Keywords: Organizational Design, Warehouses, Output Storage, Barter Credit, Price Insurance, Credit Enforcement

JEL Classification: D23, G32, G33, L22, L25

Suggested Citation

Skrastins, Janis, Barter Credit: Warehouses as a Contracting Technology (April 7, 2021). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3567467 or http://dx.doi.org/10.2139/ssrn.3567467

Janis Skrastins (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

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