Articles

Trade Credit and Industry Dynamics: Evidence from Trucking Firms

J.-N. BARROT

The Journal of Finance

October 2016, vol. 71, n°5, pp.1975-2016

Departments: Finance

http://onlinelibrary.wiley.com/doi/10.1111/jofi.12371/full


Long payment terms are a strong impediment to the entry and survival of liquidity-constrained firms. To test this idea and its implications, I consider the effect of a reform restricting the trade credit supply of French trucking firms. In a difference-in-differences setting, I find that trucking firms' corporate default probability decreases by 25% following the restriction. The effect is persistent, concentrated among liquidity-constrained firms, and not offset by a decrease in profits. The restriction also triggers an increase in the entry of small trucking firms


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