Production flexibility and trade credit under revenue uncertainty
Koussis, Nicos (Frederick University)
Silaghi, Florina (Universitat Autònoma de Barcelona. Departament d'Empresa)

Publicació:	Wiley-Blackwell, 2024
Descripció:	39 pàg.
Resum:	In an uncertain economic environment, the ability of firms to adapt their production levels to unforeseen market demand is critical for their investment, financing and trade credit policies. This paper focuses on the impact of production flexibility on trade credit values and maturity in the presence of uncertain demand. We develop a continuous-time real options framework where a buyer firm with capacity constraints orders input goods on credit from a supplier. The supplier optimally chooses the trade credit maturity, considering its influence on the buyer's optimal quantities and default timing. We distinguish between flexible firms, capable of suspending production during adverse conditions, and rigid firms, constrained to constant full-scale production. Our findings reveal that production flexibility positively affects trade credit values and maturity. Flexible firms invest in larger capacity, default later and order larger quantities, resulting in higher trade credit values. Suppliers extend longer maturities to flexible firms, reflecting their higher creditworthiness and the positive effects of extended trade credit on their installed capacity. Furthermore, we explore extensions to our framework, including switching costs, entry timing, interactions between debt and trade credit and a non-cooperative bargaining game.
Ajuts:	Agencia Estatal de Investigación PID2020-114460GB-C31
Drets:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, i la comunicació pública de l'obra, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original. No es permet la creació d'obres derivades.
Llengua:	Anglès
Document:	Article ; recerca ; Versió publicada
Matèria:	Production flexibility ; Real options ; Supply chain ; Trade credit
Publicat a:	Journal of Business Finance and Accounting, 2024, ISSN 1468-5957

DOI: 10.1111/jbfa.12786

39 p, 2.8 MB

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