When reading a recently published paper, I saw the paragraph

We construct a sample of over 200,000 supply chains 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.

Can I ask what does "recursive moral hazard theory of trade credit" and what is "financing advantage theory"?

The short description here is still ambiguous to me about the meaning

The recursive moral hazard theory of trade credit describes a steady state equilibrium of incentives along the supply chain

  • 1
    $\begingroup$ Have you looked at the references? The recursive moral hazard theory of trade credit seems to refer to a 2012 paper by Kim and Shin. $\endgroup$ – Michael Greinecker Jun 17 at 7:11
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    $\begingroup$ For financing advantage theory, there seem to be more papers starting with a 1974 paper by Schwartz. $\endgroup$ – Michael Greinecker Jun 17 at 7:18

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