NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Tor Jacobson

Sveriges Riksbank
10337 Stockholm
Sweden

E-Mail: tor.jacobson@riksbank.se
Institutional Affiliation: Sveriges Riksbank

NBER Working Papers and Publications

May 2016Curbing Shocks to Corporate Liquidity: The Role of Trade Credit
with Niklas Amberg, Erik von Schedvin, Robert Townsend: w22286
Using data on exogenous liquidity losses generated by the fraud and failure of a cash-in-transit firm, we demonstrate a causal impact on firms’ trade credit usage. We find that firms manage liquidity shortfalls by increasing the amount of drawn credit from suppliers and decreasing the amount issued to customers. The compounded trade credit adjustments are at least as great, if not greater than corresponding adjustments in cash holdings, suggesting that trade credit positions are economically important sources of reserve liquidity. The underlying mechanism in trade credit adjustments is in part due to shifts in credit durations—both upstream and downstream.
 
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