Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81882
Authors: 
Jacobsen, Tor
von Schedvin, Erik
Year of Publication: 
2012
Series/Report no.: 
Sveriges Riksbank Working Paper Series 263
Abstract: 
We quantify the importance of trade credit chains for the propagation of corporate bankruptcies. Our results show that trade creditors (suppliers) that issue more trade credit are more exposed to trade debtor (customer) failures, both in terms of the likelihood of experiencing a debtor failure and the loss given failure. We further document that the credit loss invoked by a debtor failure imposes a substantially enhanced bankruptcy risk on the creditors. The propagation mechanism is mitigated for creditors that are less levered, cash rich, and highly profitable, and enhanced in R&D intense industries and during economic downturns.
Subjects: 
Trade credit
Credit chains
Bankruptcy
Contagion
JEL: 
G30
G33
Document Type: 
Working Paper

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