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dc.contributor.authorBoissay, Fredericen_US
dc.contributor.authorGropp, Reinten_US
dc.description.abstractUsing a unique data set on trade credit defaults among French firms, we investigate whether and howtrade credit is used to relax financial constraints. We show that firms that face idiosyncratic liquidityshocks are more likely to default on trade credit, especially when the shocks are unexpected, firmshave little liquidity, are likely to be credit constrained or are close to their debt capacity. We estimatethat credit constrained firms pass more than one fourth of the liquidity shocks they face on to theirsuppliers down the trade credit chain. The evidence is consistent with the idea that firms provideliquidity insurance to each other and that this mechanism is able to alleviate the consequences of creditconstraints. 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 firmswith access to outside finance to small, credit constrained firms through trade credit chains.en_US
dc.relation.ispartofseries|aWorking paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting |x179en_US
dc.subject.keywordinter-firm liquidity provisionen_US
dc.subject.keywordtrade crediten_US
dc.subject.keywordcredit constraintsen_US
dc.subject.keywordcredit chainsen_US
dc.subject.stwLieferantenkredit , Kreditversicherung , Verschuldungsrestriktion , Betriebliche Liquiditäten_US
dc.titleTrade Credit Defaults and Liquidity Provision by Firmsen_US
dc.typeWorking Paperen_US

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