Working Paper: CEPR ID: DP18468
Authors: Laura Bottazzi; Goutham Gopalakrishna; Claudio Tebaldi
Abstract: We model the joint financial decisions of a bank, a supplier, and their customers when firms have access to a factoring service to support a trade credit agreement. To explore the nexus between firms’ capital structure and the intensity of their financial and productive interlinkages we develop a structural model that integrates a ’supply chain of credit’ with a modelof ’downstream competition’ for customers and rationalizes the emergence of the granular networks that shape firms risk exposure. We exploit information from a proprietary dataset to identify a number of empirical regularities that correlate the use of factoring services offered by the bank with customers’ and suppliers’ capital structure determinants.
Keywords: banks; capital structure; factoring; firm volatility; supply chain of credit
JEL Codes: G2; G21; G32; G38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| factoring services by banks (G21) | trade credit relationships stability (L14) |
| factoring services by banks (G21) | capital structure of firms (G32) |
| regulatory changes (G18) | provision of factoring services to customers (G20) |
| financial health of suppliers (G32) | credit provision (G21) |
| equity capital among suppliers (G32) | reliance on factored trade credit (L14) |