Cuñat, Vicente (2006) Trade credit: suppliers as debt collectors and insurance providers. The Review of Financial Studies, 20 (2). pp. 491-527. ISSN 0893-9454
Abstract
This article examines how in a context of limited enforceability of contracts suppliers may have a comparative advantage over banks in lending to customers because they are able to stop the supply of intermediate goods. Suppliers may act also as liquidity providers, insuring against liquidity shocks that could endanger the survival of their customer relationships. The relatively high implicit interest rates of trade credit are the result of insurance and default premiums that are amplified whenever suppliers face a relatively high cost of funds. I explore these effects empirically for a panel of UK firms.
| Item Type: | Article |
|---|---|
| Official URL: | http://rfs.oxfordjournals.org/ |
| Additional Information: | © 2007 Oxford University Press |
| Library of Congress subject classification: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
| Journal of Economic Literature Classification System: | D - Microeconomics > D9 - Intertemporal Choice and Growth > D92 - Intertemporal Firm Choice and Growth, Investment, or Financing G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General M - Business Administration and Business Economics; Marketing; Accounting > M1 - Business Administration > M13 - Entrepreneurship |
| Sets: | Research centres and groups > Managerial Economics and Strategy Group Departments > Finance Departments > Management Collections > Economists Online Research centres and groups > Financial Markets Group (FMG) |
| Date Deposited: | 10 Nov 2011 14:13 |
| URL: | http://eprints.lse.ac.uk/39412/ |
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