Curbing Shocks to Corporate Liquidity: The Role of Trade Credit
Name
711403.pdf
Description
Published version
Size
839.86 KB
Format
Adobe PDF
Checksum (MD5)
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Author(s)
Amberg, Niklas
Jacobson, Tor
von Schedvin, Erik
Townsend, Robert
Date Issued
January 2021
Journal
Journal of Political Economy
Publisher
University of Chicago Press
Citation
Amberg, Niklas et al. "Curbing Shocks to Corporate Liquidity: The Role of Trade Credit." Journal of Political Economy 129, 1 (January 2021): 182-237. © 2020 University of Chicago
Version
Final published version
Abstract
Using data on liquidity shortfalls generated by the fraud and failure of a cash-in-transit firm, we demonstrate effects on firms’ trade credit usage. We find that firms manage liquidity shortages by increasing the amount of credit drawn from suppliers and decreasing the amount issued to customers. The compounded trade credit adjustments are on average of similar magnitude as corresponding adjustments in cash holdings, suggesting that trade credit positions are economically important sources of reserve liquidity for firms. The underlying mechanism in trade credit adjustments is in part due to shifts in overdue payments.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1086/711403
