Arbeitspapier
Trade credit and the propagation of corporate failure: An empirical analysis
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.
- Language
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Englisch
- Bibliographic citation
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Series: Sveriges Riksbank Working Paper Series ; No. 263
- Classification
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Wirtschaft
Corporate Finance and Governance: General
Bankruptcy; Liquidation
- Subject
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Trade credit
Credit chains
Bankruptcy
Contagion
Lieferantenkredit
Insolvenz
Ansteckungseffekt
Schweden
- Event
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Geistige Schöpfung
- (who)
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Jacobsen, Tor
von Schedvin, Erik
- Event
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Veröffentlichung
- (who)
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Sveriges Riksbank
- (where)
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Stockholm
- (when)
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2012
- Handle
- Last update
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10.03.2025, 11:46 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Jacobsen, Tor
- von Schedvin, Erik
- Sveriges Riksbank
Time of origin
- 2012