Economics Department

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TITLE:
The Impact of Macroeconomic Uncertainty on Trade Credit for Non-Financial Firms"

AUTHOR(S):
Christopher F. Baum, Boston College
Mustafa Caglayan, University of Leicester
Neslihan Ozkan, University of Bristol

DOCUMENT TYPE: Article

ABSTRACT:
In this paper we hypothesize that greater macroeconomic uncertainty would cause firms to increasingly turn to their suppliers as a source of finance, making greater use of trade credit. We test this hypothesis using a panel of non-financial firms drawn from the annual COMPUSTAT database and show that an increase in macroeconomic uncertainty leads to a narrowing of the cross-sectional distribution of firms' trade credit-to-sales ratios.