Abstract
The aim of this paper is to examine whether trade credit can help absorb adverse shocks to firms. When firms encounter exogenous adverse shocks, if relaxation of terms of credit payment to suppliers can hold back the level of firms' real activities, then they do not need to reduce their purchases from suppliers. We test this hypothesis by using data of SMEs (small- and medium-sized enterprises) from two corporate surveys taken in Japan after the Global Financial Crisis and COVID-19. We find that firms with extended payment periods are still likely to reduce their purchases from suppliers that indicates trade credit does not help to absorb adverse shocks.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
