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Supply Chain Disruptions and Trade Credit

Author

Listed:
  • 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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    File URL: https://www.rieti.go.jp/jp/publications/dp/17e054.pdf
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    References listed on IDEAS

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    3. Christoph E. Boehm & Aaron Flaaen & Nitya Pandalai-Nayar, 2019. "Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tōhoku Earthquake," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 60-75, March.
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    10. WAKASUGI Ryuhei & TANAKA Ayumu, 2013. "Determinants of the Reconstruction Period from the Great East Japan Earthquake: Evidence from manufacturing firms in Tohoku (Japanese)," Discussion Papers (Japanese) 13002, Research Institute of Economy, Trade and Industry (RIETI).
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    12. Jacobson, Tor & von Schedvin, Erik, 2012. "Trade Credit and the Propagation of Corporate Failure: An Empirical Analysis," Working Paper Series 263, Sveriges Riksbank (Central Bank of Sweden).
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    Cited by:

    1. Jiangtao FU & Petr MATOUS & TODO Yasuyuki, 2018. "Trade Credit in Global Supply Chains," Discussion papers 18049, Research Institute of Economy, Trade and Industry (RIETI).
    2. 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).

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