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  • 2018
  • Working Paper

Trade Creditors' Information Advantage

By: Victoria Ivashina and Benjamin Iverson
  • Format:Print
  • | Language:English
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Abstract

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.

Keywords

Trade Credit; Distress; Bankruptcy; Credit; Information; Insolvency and Bankruptcy

Citation

Ivashina, Victoria, and Benjamin Iverson. "Trade Creditors' Information Advantage." NBER Working Paper Series, No. 24269, January 2018.
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About The Author

Victoria Ivashina

Finance
→More Publications

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More from the Authors
  • High-Yield Debt Covenants and Their Real Effects By: Falk Bräuning, Victoria Ivashina and Ali Ozdagli
  • Loan Types and the Bank Lending Channel By: Victoria Ivashina, Luc Laeven and Enrique Moral-Benito
  • PE Secondaries: Blackstone Strategic Partners By: Victoria Ivashina, Luis M. Viceira, John D. Dionne and Alys Ferragamo
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