Trade Credit and the Effect of Macro-Financial Shocks: Evidence from U.S. Panel Data
By W. Choi, Yungsan Kim. Journal of Financial and Quantitative Analysis, 2005
150 citations recorded by the source corpus.
Abstract Using disaggregated panel data, we examine how firms change trade credit in response to a monetary tightening. We find that both accounts payable and accounts receivable increase with tighter monetary policy, implying that trade credit helps firms absorb the effect of a credit contraction. Further, both S&P 500 firms and a comparison group of smaller firms increase net trade credit (accounts receivable minus payable), making up for the reduced liquidity associated with tighter policy. However, we find no evidence that large firms play this role more actively than smaller firms.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/8ed9fb7ad3c5bf68acdd56c4685f7737cf7555c6
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Citations in the corpus
- Trade Credit, the Financial Crisis, and SME Access to Finance (2013, unknown): “On balance, the empirical literature has found that trade credit usage increases in response to monetary tightening (e.g., Calomiris, Himmelberg and Wachtel 1995, Nielsen 2002, Choi and Kim 2005, and Demiroglu, James and Kizilaslan 2012).”
- Do Firms Use the Trade Credit Channel to Manage Growth? (2013, unknown): “Several empirical studies have shown that firms substitute bank loans for trade credit in an effort to limit the impact of the traditional bank lending channel (Nilsen, 2002; De Blasio, 2005; Choi and Kim, 2005; Guariglia and Mateut, 2006) or, as shown in Figure 2, to limit the impact”
- Bank credit and trade credit: Evidence from SMEs over the financial crisis (2016, unknown): “Consequently, there is a shift in how firms are able to redistribute credit over time, while Choi and Kim (2005) find that when banks refrain from lending to smaller firms during a monetary contraction, large US firms then withdraw financial help to small firms too.”
- The influence of economic policy uncertainty on corporate trade credit and firm value (2020, methodology): “We follow Choi and Kim (2005) and construct the macro-financial shocks variable measured by the change in Federal funds rate, which is arguably a good indicator of the Federal Reserve’s policy stance.”
- Trade Credit Contracts (2010, unknown): “…(say, due to monetary tightening or bank distress), buyers might depend more on trade credit for short-term financing as a response to credit market tightening, and this may be especially true for small firms (see, for example, Himmelberg et al. 1995, Choi and Kim, 2005, and Love et al. 2007).”