Asymmetry Baby, Asymmetry: Merchandise Creditors' Data Advantage

From Harvard Business School's Working Knowledge blog:

Trade Creditors' Information Advantage

Overview — Trade credit represents almost a quarter of the liabilities of States firms. There are several theories explaining this fact. This report reexamines whether suppliers jibe somebody data almost their merchandise partners, past times analyzing their guide inward bankruptcy.

Author Abstract
Using data on the sales of debt claims for 132 States Chapter eleven bankruptcy cases, nosotros exhibit that large merchandise creditors’ decisions to sell receivables of a distressed fellowship inward bankruptcy are predictive of lower recovery rates, as well as that inward such cases these creditors sell ahead of less informed suppliers as well as other creditors. This lawsuit is particularly pronounced for to a greater extent than opaque distressed firms, when merchandise creditors’ data payoff is probable largest. This prove shows that suppliers that extend pregnant amounts of merchandise credit jibe somebody data almost their merchandise partners. Trade creditors who are geographically closer or inward similar industries tend to lend the most, suggesting that these are ii channels through which suppliers jibe an data advantage.

Paper Information

• Full Working Paper Text
• Working Paper Publication Date: Feb 2018
• HBS Working Paper Number: NBER Working Paper Series, No. 24269
• Faculty Unit(s): Finance