Interenterprise Credit and Adjustment during Financial Crises: The Role of Firm Size

Small and medium‐sized enterprises (SMEs) suffered a sharp contraction in their borrowing from banks during the Great Recession. Analyzing a large firm‐level database for European countries, the paper shows that trade credit amplified the liquidity squeeze on SMEs, with adverse effects on their real...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2019-09, Vol.51 (6), p.1547-1580
Main Authors: CORICELLI, FABRIZIO, FRIGERIO, MARCO
Format: Article
Language:English
Subjects:
Credit
Economic crisis
Economic models
Economics and Finance
financial crises
G01
G32
Great Recession
Humanities and Social Sciences
L14
Recessions
Side effects
Small & medium sized enterprises-SME
SMEs
trade credit
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Summary:Small and medium‐sized enterprises (SMEs) suffered a sharp contraction in their borrowing from banks during the Great Recession. Analyzing a large firm‐level database for European countries, the paper shows that trade credit amplified the liquidity squeeze on SMEs, with adverse effects on their real activity. SMEs sharply increased their net trade credit and thus transferred financial resources to larger firms. Given the large weight of SMEs in the economy of European countries, the liquidity squeeze of SMEs likely contributed to the depth of the output fall and the slow recovery in Europe during the Great Recession.
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.12557