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Geopolitical risk exposure and credit terms: Evidence from Global supply chains

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  • Tang, Ning
  • Huang, Yin-Siang

Abstract

This study investigates how geopolitical risks embedded in global supply chains affect corporate credit terms. Using a Difference-in-Differences design, we show that firms with customers or suppliers in high-risk regions face significantly higher loan spreads. Despite elevated risk, these firms are granted larger loan amounts after lender due diligence, with longer maturities observed particularly when suppliers are concentrated in geopolitically sensitive areas. The results highlight that lenders distinguish between upstream and downstream exposure when pricing and structuring credit, offering new insights into how geopolitical uncertainty transmits through supply chain networks to influence international lending behavior.

Suggested Citation

  • Tang, Ning & Huang, Yin-Siang, 2025. "Geopolitical risk exposure and credit terms: Evidence from Global supply chains," Economics Letters, Elsevier, vol. 254(C).
    • Handle: RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525003155
    DOI: 10.1016/j.econlet.2025.112478
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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