Does trade credit respond to negative shocks to customer firms?

• Autor(a) principal: Dahan, Victor Barbosa
• Data de Publicação: 2018
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
• Texto Completo: http://hdl.handle.net/10438/22980
• topic: Trade credit; Adverse shock; Supply chain; Corporate fraud; Buyer-seller relationship; Administração pública; Crédito comercial; Logística empresarial; Governança corporativa; Fraude; Relações interorganizacionais

We investigate how the provision of trade credit by suppliers reacts when their customer firms suffer an adverse shock. We exploit an exogenous adverse shock to firms in the Brazilian food industry caused by the public announcement of a fraud investigation named Operation Weak Flesh. Using a within-firm differences-in-differences identification strategy, we found that customers suffered a negative impact of around 20 to 30% in their accounts payable, while suppliers reduced their credit provision by around 5 to 6%. The evidence suggests that suppliers would rather shield themselves against increased risks in the supply chain than try to save their customers and their relationship with them.