Trade Credit and Industry Dynamics: Evidence from Trucking Firms

Authors

  • JEAN-NOËL BARROT

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    • Jean-Noël Barrot is with MIT Sloan School of Management and CEPR. I am indebted to Antoinette Schoar and David Thesmar for their invaluable guidance and support. I am grateful to Michael Roberts (the Editor) as well as two anonymous referees for their suggestions. I thank Francois Derrien, Laurent Fresard, Denis Gromb, Uli Hege, Augustin Landier, Clemens Otto, and Mitchell Petersen for their very helpful comments in the early stages of this project. I am deeply grateful to Claire Lelarge for her insights and assistance with the data. This work also benefited greatly from conversations with Pol Antras, Adrien Auclert, Arnaud Costinot, and Fritz Foley and from the suggestions of seminar participants at the University of Zurich, Wharton, Berkeley Haas, MIT Sloan, Harvard Business School, Yale SOM, Kellogg, Chicago Booth, UNC Kenan-Flager, Fisher College at Ohio State University, Stanford GSB, ESSEC, Cornell, Dartmouth, Duke, Princeton, and Brigham Young University. All remaining errors are my own. I acknowledge support from the AXA Research Fund and the HEC Paris Foundation.


ABSTRACT

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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