Photo by sharonmccutcheon from unsplash
Analyzing a large firm-level database for European countries, the paper shows that during the Great Recession trade credit amplified the liquidity squeeze on SMEs induced by the contraction of bank… Click to show full abstract
Analyzing a large firm-level database for European countries, the paper shows that during the Great Recession trade credit amplified the liquidity squeeze on SMEs induced by the contraction of bank credit. Because of their generally weaker bargaining power in the inter-enterprise credit market, SMEs sharply increased their net trade credit and thus transferred financial resources to larger firms. The paper finds that the liquidity squeeze induced by trade credit had large negative effects on real activity by SMEs, contributing to the fall in employment, wages and investments.
Journal Title: Journal of Money, Credit and Banking
Year Published: 2019
Link to full text (if available)
Share on Social Media: Sign Up to like & get
recommendations!