Discussion paper

DP11680 Inter-Enterprise Credit and Adjustment During Financial Crises: The Role of Firm Size

Analyzing a large firm-level database for European countries, the paper
shows that during the Great Recession trade credit amplified the liquidity
squeeze on SMEs induced by the contraction of bank credit. Because of
their generally weaker bargaining power in the inter-enterprise credit market,
SMEs sharply increased their net trade credit and thus transferred financial
resources to larger firms. The paper finds that the liquidity squeeze
induced by trade credit had large negative effects on real activity by SMEs,
contributing to the fall in employment, wages and investments.

£6.00
Citation

Coricelli, F and M Frigerio (2016), ‘DP11680 Inter-Enterprise Credit and Adjustment During Financial Crises: The Role of Firm Size‘, CEPR Discussion Paper No. 11680. CEPR Press, Paris & London. https://cepr.org/publications/dp11680