Counterparty Risk: Implications for Network Linkages and Asset Prices

• 成果类型: Article
• 署名作者: Grigoris, Fotis; Hu, Yunzhi; Segal, Gill
• 署名单位: Indiana University System; Indiana University Bloomington; IU Kelley School of Business; University of North Carolina; University of North Carolina Chapel Hill; University of North Carolina School of Medicine
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhac044
• 发表日期: 2023
• 页码: 814
• 关键词: trade credit; term structure; INVESTMENT; returns; GROWTH; equity; predictability; PRODUCTIVITY; persistence; distress

摘要

We study the relation between trade credit, asset prices, and production-network linkages. Empirically, firms extending more trade credit earn 7.6% p.a. lower risk premiums and maintain longer relationships with customers. Using a production-based model, we quantitatively explain these novel facts. Trade credit reduces the departure probability of high-quality customers, thereby reducing firms' exposures to systematic costs incurred in finding new customers. The mechanism predicts that the aggregate amount of trade credit proxies for customer-search costs and that suppliers with shorter-duration links to customers command higher expected returns. We confirm these and other novel predictions in the data.