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Access to Debt and the Provision of Trade Credit

Author

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  • Matthew Billett

    (Indiana University, Bloomington, Indiana 47405)

  • Kayla Freeman

    (University of Georgia, Athens, Georgia 30602)

  • Janet Gao

    (Georgetown University, Washington, District of Columbia 20057)

Abstract

We examine how access to debt markets affects firms’ incentives to provide trade credit. Using hand-collected trade credit data between customer-supplier pairs and two exogenous shocks to firms’ debt capacity, we show that better access to debt reduces firms’ provision of trade credit per dollar of sales. The decline in trade credit is concentrated on ex ante powerful customers, but absent for weak ones, suggesting that better access to debt improves firms’ bargaining position relative to powerful customers. The decline in trade credit leads customers to cut investment, increase leverage, and scale back trade credit provision to firms further downstream.

Suggested Citation

  • Matthew Billett & Kayla Freeman & Janet Gao, 2026. "Access to Debt and the Provision of Trade Credit," Management Science, INFORMS, vol. 72(4), pages 3147-3174, April.
    • Handle: RePEc:inm:ormnsc:v:72:y:2026:i:4:p:3147-3174
    DOI: 10.1287/mnsc.2023.04090
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