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Supply Chain Disruptions and Trade Credit

Author

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  • LU Yi
  • OGURA Yoshiaki
  • TODO Yasuyuki
  • ZHU Lianming

Abstract

It has been shown that input-output linkages along supply chains affect firms' performance such as sales, productivity, and innovative capacity. This paper explores a new aspect in the literature, examining how supply chain relations influence financial transactions between firms. More specifically, this paper, using an exhaustive dataset on buyer-supplier networks in Japan, studies whether supply chain disruptions due to the Great East Japan earthquake in 2011 affected firms' utilization of trade credit. We find evidence showing that customers who were affected by the earthquake imposed a larger amount of trade credit on their suppliers (i.e., utilized fewer cash transactions) even two years after the earthquake. In addition, trade credit of indirect suppliers (e.g., suppliers of suppliers) of affected customers also increased, indicating that the effect of supply chain disruptions on trade credit propagates through production linkages. We further find heterogeneous effects of the supply chain disruptions on firms' trade credit; the effect is larger for suppliers with a better financial performance before the disaster.

Suggested Citation

  • LU Yi & OGURA Yoshiaki & TODO Yasuyuki & ZHU Lianming, 2017. "Supply Chain Disruptions and Trade Credit," Discussion papers 17054, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:17054
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    References listed on IDEAS

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    Cited by:

    1. Yuzuka Kashiwagi & Yasuyuki Todo & Petr Matous, 2021. "Propagation of economic shocks through global supply chains—Evidence from Hurricane Sandy," Review of International Economics, Wiley Blackwell, vol. 29(5), pages 1186-1220, November.
    2. Yuzuka Kashiwagi & Petr Matous & Yasuyuki Todo, 2018. "International propagation of economic shocks through global supply chains," Working Papers 1810, Waseda University, Faculty of Political Science and Economics.
    3. Jiangtao FU & Petr MATOUS & TODO Yasuyuki, 2018. "Trade Credit in Global Supply Chains," Discussion papers 18049, Research Institute of Economy, Trade and Industry (RIETI).
    4. Lafond, François & Astudillo-Estévez, Pablo & Bacilieri, Andrea & Borsos, András, 2023. "Firm-level production networks: what do we (really) know?," INET Oxford Working Papers 2023-08, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    5. KASHIWAGI Yuzuka & TODO Yasuyuki, 2022. "Trade Disruption and Risk Perception," Discussion papers 22086, Research Institute of Economy, Trade and Industry (RIETI).
    6. KASHIWAGI Yuzuka & TODO Yasuyuki & Petr MATOUS, 2018. "Propagation of Shocks by Natural Disasters through Global Supply Chains," Discussion papers 18041, Research Institute of Economy, Trade and Industry (RIETI).
    7. Thang, Doan Ngoc & Ha, Le Thanh, 2022. "Trade credit and global value chain: Evidence from cross-country firm-level data," International Economics, Elsevier, vol. 171(C), pages 110-129.

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