2025/03/19 by Mélina London, Maéva Silvestrini · 1 voice
Business, Management and Accounting · #Working Capital and Financial Performance #Corporate Finance and Governance #Corporate Taxation and Avoidance
paper · doi:10.1016/j.jinteco.2025.104064
openalex publication_date 2025/03/19 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
This paper provides empirical evidence on the impact of US monetary policy surprises on firm-to-firm trade credit in emerging markets, using a proprietary firm-level database. We show that trade credit acts as a buffer against the adverse effects of US monetary tightening, which, by constraining global financial conditions, increases reliance on trade credit as an alternative financing source. This effect is more pronounced for buyers with poor credit quality, who are primarily affected when financial conditions tighten. This later effect only exists in pre-existing relationships, where trust can be more readily established, compared to new partnerships. Given the widespread use of trade credit in emerging markets, this buffering role is crucial for mitigating financial pressures in these economies.