Predicting corporate credit risk: Network contagion via trade credit.

ABSTRACT: Trade credit is a payment extension granted by a selling firm to its customer. Companies typically respond to late payments from their customers by delaying payments to suppliers, thus generating a ripple through the transaction network. Therefore, trade credit is as a potential vehicle of propagation of losses in case of default events. The goal of this work is to leverage information on the trade credit among connected firms to predict imminent defaults of firms. We use a unique dataset of client firms of a major Italian bank to investigate firm bankruptcy between October 2016 to March 2018. We develop a model to capture network spillover effects originating from the supply chain on the probability of default of each firm via a sequential approach: the output of a first model component o

SUBMITTER: Berloco C 

PROVIDER: S-EPMC8084139 | biostudies-literature | 2021

REPOSITORIES: biostudies-literature