Trade Creditors' Information Advantage / Victoria Ivashina, Benjamin Iverson.

Format:

Book

Author/Creator:

Ivashina, Victoria.

Contributor:

Iverson, Benjamin.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24269.

NBER working paper series no. w24269

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Using information on the sales of debt claims for 132 U.S. Chapter 11 bankruptcy cases, we show that large trade creditors' decisions to sell receivables of a distressed company in bankruptcy are predictive of lower recovery rates, and that in such cases these creditors sell ahead of less informed suppliers and other creditors. This result is especially pronounced for more opaque distressed firms, when trade creditors' information advantage is likely largest. This evidence shows that suppliers that extend significant amounts of trade credit hold private information about their trade partners. Trade creditors who are geographically closer or in similar industries tend to lend the most, suggesting that these are two channels through which suppliers hold an information advantage.

Notes:

January 2018.

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