@techreport{Boissay2007Trade,
abstract = {Using a unique data set on trade credit defaults among French firms, we investigate whether and how
trade credit is used to relax financial constraints. We show that firms that face idiosyncratic liquidity
shocks are more likely to default on trade credit, especially when the shocks are unexpected, firms
have little liquidity, are likely to be credit constrained or are close to their debt capacity. We estimate
that credit constrained firms pass more than one fourth of the liquidity shocks they face on to their
suppliers down the trade credit chain. The evidence is consistent with the idea that firms provide
liquidity insurance to each other and that this mechanism is able to alleviate the consequences of credit
constraints. In addition, we show that the chain of defaults stops when it reaches firms that are large,
liquid, and have access to financial markets. This suggests that liquidity is allocated from large firms
with access to outside finance to small, credit constrained firms through trade credit chains.},
author = {Frederic Boissay and Reint Gropp},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {D92; G30; G20; 330; inter-firm liquidity provision; trade credit; credit constraints; credit chains; Lieferantenkredit , Kreditversicherung , Verschuldungsrestriktion , Betriebliche Liquidit\"{a}t},
language = {eng},
number = {179},
title = {Trade Credit Defaults and Liquidity Provision by Firms},
type = {Working paper series / Johann-Wolfgang-Goethe-Universit\"{a}t Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting},
url = {http://hdl.handle.net/10419/23442},
year = {2007}
}
