Trade credit and the propagation of corporate failure: An empirical analysis

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 263

Classification and Topics

• Classification: Wirtschaft ; Corporate Finance and Governance: General ; Bankruptcy; Liquidation
• Subject: Trade credit ; Credit chains ; Bankruptcy ; Contagion ; Lieferantenkredit ; Insolvenz ; Ansteckungseffekt ; Schweden

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jacobsen, Tor ; von Schedvin, Erik
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/81882
• Last update: 10.03.2025, 11:46 AM CET