Logo
Munich Personal RePEc Archive

In-kind financing during a pandemic: Trade credit and COVID-19

Srivastava, Jagriti and Gopalakrishnan, Balagopal (2021): In-kind financing during a pandemic: Trade credit and COVID-19.

[thumbnail of MPRA_paper_110965.pdf]
Preview
PDF
MPRA_paper_110965.pdf

Download (1MB) | Preview

Abstract

Using a cross-country quarterly firm-level dataset, we empirically examine the impact of the COVID-19 pandemic on the trade credit channel of firms. In contrast to the impact on trade credit documented during earlier crisis episodes, we find that firms with poor credit quality obtain lower amounts of trade credit from their supplier firms during the quarters following the COVID-19 outbreak. The findings suggest that less creditworthy firms are credit rationed by their suppliers during a product market crisis, in contrast to the credit substitution documented between formal financial institutions and suppliers during a credit market crisis. Furthermore, we document that firms with better growth prospects and firms with better stakeholder relationships are able to obtain trade credit in the post-pandemic period, despite their poor creditworthiness. Our empirical analysis supports the view that supplier financing is conditional on the product market conditions and is not always a generous substitute for bank credit.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.