Trade credit and profitability in production networks

Michael Gofman*, Youchang Wu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

21 Scopus citations


We construct a sample of over 200,000 supply chains between 2003 and 2018 to conduct a chain-based analysis of trade credit. Our study uncovers novel stylized facts about trade credit both within and across supply chains. More upstream firms borrow more from suppliers, lend more to customers, and hold more net trade credit. This upstreamness effect in trade credit is weaker for more profitable firms and for longer chains. Firms in more central or more profitable chains provide more net trade credit. Our results are generally consistent with the recursive moral hazard theory of trade credit. Evidence for the financing advantage theory is mixed.

Original languageAmerican English
Pages (from-to)593-618
Number of pages26
JournalJournal of Financial Economics
Issue number1
StatePublished - Jan 2022
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2021 Elsevier B.V.


  • Production networks
  • Profitability
  • Supply chains
  • Trade credit


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